Bank Fees in Violation of Military Authorization Act?

By | Oct 6, 2011

One of the provisions of the FY 2007 Military Authorization Act, makes it illegal for creditors to grant payday loans and car title loans to military members.

The change also prohibits charging more than 36 percent interest to military borrowers. Fees, service charges, renewal charges, credit insurance premiums or any other product “sold” with the loan must be included when calculating the interest rate.

Among other things, this law prohibits “using a check or any other access to a member’s financial account as security for a loan.”

So… what if a member of the military has a checking account with one of the banks or credit unions making loans to customers based on their direct deposit paychecks? These “payday loans” are then repaid in full – both principal and fees – once the direct deposit clears. It’s VERY common for this bank customer to take out another loan. If you analyze the numbers, you soon calculate these bank customers pay $900 in interest to borrow $500 from the bank for less than 6 months – an APR of 365% !

Doesn’t this violate the Act? I’ve looked at these transactions and the banks and credit unions offer virtually zero disclosure. I’m not a lawyer but, if I was, “I’d be licking my chops!” The media is beginning to sniff this out. Both Bloomberg and The Wall Street Journal are on this. Bank of America and the other banks are getting nailed over this new $5 ATM fee. They’re about to get MORE HEAT! Man, what a shame.

What do you think?

5 Comments so far
  1. Steve Hodgdon October 6, 2011 6:35 pm

    WE all support and honor our troops. Our industry abides by the rule and everybody else should too. Good catch Jer!

  2. Jack October 6, 2011 10:20 pm

    So if banks are doing this why is it that more people don’t complain? As for the $5.00 fee, what are they supposed to do now that congress has legislated away one of their income streams?

  3. Software for small business October 11, 2011 1:20 pm

    Magnificent! (As usual. 😛 )

  4. admin October 20, 2011 12:46 am

    Thanks, Mom!

  5. admin October 20, 2011 12:48 am

    Great job at the OLA Conference, Steve! An interview is in order… And tell Will to call!


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