Winter 2006-07
After Military Money and other publications exposed payday lenders who take advantage of military families, Congress has passed legislation designed to take a bite out of these loan sharks.
The new law, part of the 2007 Defense Authorization Act signed by President Bush in October, will cap annual interest rates on loans to military borrowers and their families at 36 percent. The cap should cramp the thousands of payday lenders across the U.S. that cluster around military bases and charge exorbitant interest rates – often 400 percent and higher – on loans that often trap borrowers in debt. The measure applies to other consumer credit products, including car title loans, which are similar to payday loans but claim title to the borrower’s vehicle as collateral.
Among other highlights, the law also:
- Provides a 2.2 percent across-the-board pay raise, the lowest military pay increase in 12 years. The raise takes effect January 1, 2007, with additional targeted raises for certain non-commissioned and warrant officers taking effect April 1.
- Authorizes payment of more than 20 types of bonuses and special pays, including a $10,000 inter-service transfer bonus (up from $2,500) for members who move to another branch of service. Bonuses and incentives for certain medical personnel also are increased.
- Requires the Department of Defense to provide full replacement value reimbursement for household goods lost or damaged in government-ordered moves for military members no later than March 1, 2008.
In separate legislation, the new Military Personnel Financial Services Protection Act will shield servicemembers from companies selling risky financial products, including expensive and unnecessary life insurance, as well as mutual funds with excessive fees.