By Katalina M. Bianco, J.D.
The House Armed Services Committee on April 29 passed a bill that includes a provision that would delay for at least one year a Department of Defense proposal purportedly intended to help shield servicemembers and their families from predatory lending practices. The bill, H.R. 1735, the National Defense Authorization Act for 2016, includes a Military Lending Act reporting requirement responsible for the delay. The committee passed the bill by a vote of 60-2.
Under the DoD proposal, issued in September 2014, the department would amend its regulation implementing the MLA to significantly expand the range of closed-end and open-end credit products that fall within the “consumer credit” definition. In addition, the proposed amendments to the DoD regulation would revise provisions governing a tool that a creditor may use in evaluating whether a consumer is a “covered borrower”; increase the disclosures that a creditor must provide to a covered borrower; and implement enforcement provisions of the MLA.
Representative Tammy Duckworth (D-Ill), a member of the committee, offered an amendment to the bill that would strike the reporting requirement, and thus the one-year delay of the proposal, from H.R. 1735. A joint letter by a group of consumer trade organizations to Thornberry and Rep. Adam Smith (D-Wash), Ranking Member of the Committee, urged support of the Duckworth amendment.
“The Department of Defense has determined that predatory lending impacts servicemembers’ security clearance which in turn impacts the ability of our military to deploy troops overseas. It is unconscionable to think Congress would risk national security to protect payday lenders,” the trade associations wrote. The groups noted that the DoD described payday and other high-cost lending as “the biggest, current financial challenge facing our servicemembers, Veterans, and their families.” They also called the MLA reporting requirement “burdensome and duplicative.”
Prior to the committee vote, Sen. Sherrod Brown (D-Ohio), Ranking Member of the Senate Banking Committee, urged House Republicans to stop what he said were efforts intended to undermine the DoD proposal. “We should never put the interests of payday lenders ahead of the well-being of our men and women in uniform. This is a blatant attempt to stall a sensible proposal that will help protect servicemembers and their families from predatory lenders,” said Brown. “DOD's rule is designed to crack down on abusive and deceptive lending practices that target military families and often trap them in a continuing cycle of spiraling debt.”
Brown noted that according to a recent report by the Consumer Financial Protection Bureau, servicemembers, veterans, and their families submitted 17,000 consumer complaints to the bureau last year.
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