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Transcript: Military Lending and Debt

In honor of Memorial Day, ProPublica and Marketplace will host a live discussion on the issues facing military members in debt.

The Military Lending Act of 2007 attempted to protect military members and their families from predatory loans. It capped annual percentage rates at 36 percent for payday and some auto-title loans.

In response, storefront lenders simply started selling other high-interest products. As our recent investigation found, they cluster around military bases in Georgia and other places around the country.

And considering that indebted service members can lose their security clearance, the rise of these loans has larger implications for the military.

We were joined by Marketplace's Mitchell Hartman (@entrepreneurguy) and our own Paul Kiel (@paulkiel). Some key takeaways:

  • The Military Lending Act has reduced predatory lending to service members, but there are gaps in the law. In the course of their reporting, Hartman and Kiel met military members paying more than the 36% APR cap in the Military Lending Act. "When you combine that with the fact that the types of loans that payday loan companies are offering have been morphing a bit (largely in response to heat from regulators and lawmakers) - those gaps end up being quite significant," wrote Kiel.
  • Debt can affect service members' security clearance, which in turn has potential national security ramifications.  The reason that members of the military get added protection is because predatory lending has become so commonplace that it is an issue of national security," wrote reader Erik Heath.
  • Some members of Congress think the MLA's 36% cap should be extended to all consumer lending.  "I don't think that 36% is such a low amount that it would drive away any access our clients have to loans," said reader Heath. "Some of my clients who are considered "risky" candidates can already access 36% loans. Those loans just aren't as heavily marketed and as well-known as the lucrative 300% loans."


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