DoD implements new predatory lending regulation Published Dec. 6, 2007 By 341st Space Wing Judge Advocates Office MALMSTROM AIR FORCE BASE, Mont. -- The Defense Department is committed to protecting servicemembers and their families from predatory lending practices. The new predatory lending regulation institutes new rules that will protect the financial well-being of servicemembers and their families. As part of the 2007 Talent-Nelson amendment to the John Warner National Defense Authorization Act, the Department of Defense defined regulations that limit the impact of specific high-cost predatory loans. 32 CFR part 232 was released Aug. 31 and was put into effect Oct. 1. The final rule regulates the terms of payday loans, vehicle title loans and tax refund anticipation loans when extended to active-duty servicemembers and their families. These three products have high interest rates, coupled with short payback terms. The rule limits the annual percentage rate on these loans to 36 percent. In addition, the annual percentage rate authorized in the regulation, referred to as the "military annual percentage rate" includes all fees and charges known at the time the loan is made. This prohibits the possibility of charging origination fees, administrative fees and membership fees. The regulation also prohibits contracts requiring the use of a check or access to a bank account, mandatory arbitration, waiving servicemembers' Civil Relief Act rights, and onerous legal notice as a result of taking one of these loans. Any credit agreement subject to the regulation that fails to comply with this regulation is void from inception. The rule further provides that a creditor or assignee that knowingly violates the regulation shall be subject to certain criminal penalties. The creditor is responsible for informing the borrower of the military annual percentage rate both in writing and verbally, which is a change from the normal disclosures provided to a borrower. The creditor is also responsible for informing the military borrower that they should seek other options to include financial counseling and assistance from the Military Aid Societies. For more information, contact Staff Sgt. Justin Dennison at 731-2878. Editor's Note: The information above was taken from https://aflsa.jag.af.mil/AF/lynx/afjags/.