Relief on the way for military members Published Aug. 13, 2007 By 2d Bomb Wing Legal Office BARKSDALE AIR FORCE BASE, La. -- On Oct. 1, a new Federal Law will take effect capping the interest rate military members can be charged, effectively making payday lending to military members unprofitable. Payday loan lenders are ubiquitous in the Shreveport/Bossier City area. Between the local payday lenders located just outside the gates who display patriotic signage to attract Airmen, and the dozens of predatory lenders offering high-interest loans via the internet, Barksdale's Airmen are targeted from every angle. Airmen may currently pay up to 800 percent (annualized) interest rate for such loans. An internal Department of Defense study raised such concern about payday lending practices that DOD recommended Congress take action in 2006. Congress did, adding Section 670 of the National Defense Authorization Act for Fiscal Year 2007. Section 670 requires payday lenders to: - Cap the Annual Percentage rate, known as the Military Annual Percentage Rate at 36 percent including all fees, charges, etc. - Provide mandatory loan disclosures, such as the MAPR, any disclosures required by the Truth in Lending Act, and a clear description of the payment obligations. Also, the law prohibits: - Extending credit that rolls over, renews, repays or consolidates consumer credit extended to the borrower by the same creditor with the proceeds of other credit extended to the same borrower. - Requiring the borrower to waive legal recourse under State or Federal law, including the Servicemember's Civil Relief Act. - Using a check or other method of access to a deposit, savings or financial account maintained by the borrower or the title of a vehicle as security for the obligation (except purchase money loans and long-term personal loans). - Requiring the borrower establish an allotment to repay an obligation. - Prepayment penalties. The new law applies to active-duty, dependents, Guard and Reserve members on active-duty for 30 days or more. This law is not retroactive; thus loans taken out before Oct. 1 are not subject to the interest rate cap.