Pay Day Loans for Military Families

• Annual percentage rate capped at 36 percent: Because most payday loans are for several hundred dollars and have finance charges of $15 or $20 for each $100 borrowed, a typical two-week term can equate to an annual percentage rate (APR) ranging from 391 percent to 521 percent. Payday lenders must cap the APR – which incorporates all fees and costs associated with the loan – at 36 percent when lending to servicemembers.

• No rolling over of loans: When consumers cannot pay back the loan at the time it is due, borrowers can often pay only the finance charges and renew the loan. This fee does not reduce the amount owed. If a payday loan is rolled over multiple times, it’s possible to pay several hundred dollars in fees and still owe the original amount borrowed. Payday lenders are banned from rolling over loans for servicemembers, unless the new transaction results in more favorable terms for the servicemember.

• No signing away of servicemember rights: The MLA prohibits lenders from making servicemembers waive their rights under the Servicemembers Civil Relief Act or other state or federal laws that provide critical consumer protections. The MLA also prohibits lenders from requiring servicemembers to waive their right to seek resolution of any legal claims in court.

• No requiring allotments to repay: Under the military allotment system, military personnel can repay their loans by having payments directly deducted from their paycheck before their salary is deposited in their account. When servicemembers pay by allotment, they lose certain consumer protections as well as their flexibility to adjust their budget if a financial emergency comes up. The MLA bans lenders from requiring military members to pay by the allotment system and gives servicemembers control over how their income is spent.
• http://considerchapter13.org/2013/09/22/cfpb-lays-out-guidelines-for-protecting-servicemembers-in-the-payday-lending-market-cfpb-watching-for-military-lending-act-violations-in-its-exams-of-payday-lenders/?utm_source=Sept%2023%20email&utm_campaign=9%2F23%2F13&utm_medium=email