Defense Department Curbing Lending Practices

There are so many pressures and burdens for our military members and their families. In addition to adjusting to a loved one not being home everyday, financial stress is one of the biggest. The toll it takes on both the military members and their families at home is overwhelming. The U.S. Defense Department is seeing the problem and the concern is leading to a new rule possibly being passed.

The U.S. Defense Department will be proposing that certain lenders be curbed and considered as predatory. Lenders who are described as predatory are payday loans, car title lending and tax refund anticipation loans, in addition to other services who service all military service members and their families according to a draft of the proposal.

Service members and their families are so burdened with debt and recurring bills that is has become a major concern for the Defense Department that there is a debt trap, according to the Pentagon as stated in the rough draft of the proposal.

According to the proposal, there would be a 36 percent cap on interest rates and fees on the so-called closed end loans. This excludes credit cards, home mortgages, lines of credit, and car loans.

According to Fred Becker, President of the National Association of Federal Credit Unions, "they are looking for a way to protect the men and women in uniform from payday lenders and at the same time ensure that they have access to financial services." "However all military personnel and their families have access to credit unions, but the proposal remains a work in progress."

In 2006 there was a law passed by Congress that became part of the Defense Department's reauthorization bill that mandated the Pentagon along with the federal regulatory agencies to draft anti predatory lending rules and have them implemented by October 2007.

Congress was urged by The Pentagon to set the cap at 36 percent for interest rates, no higher because The Pentagon is concerned that service members, and their families were falling deeper in debt. The service members are becoming very heavily concerned about their families at home and are unable to focus on their military missions.

There are an increasing number of denied security clearances to military personnel's, which is due mainly to financial problems according to U.S. financial regulators. The rules according to the proposal are expected to be published on Wednesday in the U.S. Federal Register.