As military personnel try to come to grips with paying high-interest rates back for loans to the banking industry, GOP House Republicans try to move quickly to help. If the lawmakers succeed in curbing the banks exorbitant interest rates, then persons in the military will have a better chance at saving.
So far, military families have been taking many negatives from the hands of the banks. So much so that many Americans are crying shame. The Consumer Financial Protection Bureau in 2014 brought to the eyes of the public the plight of service members who applied for loans from various financial entities. One case has to do with a borrower who took out a loan of $485 and ended up paying back $1,428.28. Another case has to do with a family who borrowed $2,600 from the bank and ended up paying back $3,966.84.
As many families in the military have to depend on military loans to get by, some banks take advantage of the situation by lending loans that carry higher interest rates. This practice has been going on for years. As far back as 2006, Congress was acting to stop service members from paying back loans that attract an high-interest rates. To try to stop military persons from paying back high interest loans, Congress went ahead and passed a legislation on a 36% cap that will hinder institutions from charging high interest rates burrowed for payday loans, anticipation loans that are tax refundable and auto title loans. The rules mainly applied to persons borrowing up to $2,000. To avoid being limited by the legislation, lending facilities in the U.S. did some minor changes to their policies and thus succeeded in continuing their expensive lending practice to military families and individuals. At that time, service personnel that took a $2,001 loan, has to lose out paying back loans at a higher rate of interest. The bigger banks were taking advantage of the situation and charging as high as up to 300% on annual loans.
Over the years, as new laws were passed to limit lenders from charging a higher rate of interest on loans, financial institutions worked hard to have their way. Today, other able-bodied groups are getting in on the act and speaking out against the injustice being done to persons in the military. Able-bodied groups such as Consumer Federation of America, the U.S. Public Interest Group, and Public Citizen are all giving the thumbs up to military families and individuals.
In April 2015, the Consumer Financial Protection Bureau took up a case where they alleged that Military Assistance Company and Fort Knox National Company took advantage of military persons working for the U.S. government by charging hidden fees for services rendered by them. As a result, both military companies are required to pay a consent order in the princely sum of $3.1 million as relief fund, which will be used to cover losses suffered by those U.S. military personnel affected.
Since soldier’s paychecks are reliable, service members are often prone to financial institutions that prey on them because of the great need they have for ready cash to use in regards to paying their bills and so on. Title and payday lenders were once plentiful in the U.S. and at that time were raking in big hauls of cash from the unsuspecting public and these include service members who are still in the army. Payday lenders are short in the U.S. today and the authorities are carefully monitoring the few that are still in operation. In the past, these predator companies were charging as much as 200% to 300% interest on loans. Most states in the U.S. make their own laws that govern borrowing and lending. In the state of Florida, for example, limits all interest rate to not be above 30%. Lending companies that lend money above the 30% amount are ripping off people of their hard-earned cash.
Payday loans are actually short-term loans issued by a financial entity. In California, the payday loan industry is bursting at a strong $3.1 billion. The state claimed that financial corporations lend payday loans to about 12 million persons each year. In Texas, borrowers already paid out loan fees of about $2.9 billion in 2013 and 2014.
While U.S. service members are still struggling to come to terms with the high rate of interest some lending institutions are dishing out to them, lawmakers are trying to move faster to stop the discriminating use of power seen in these companies. Will it ever end? The answer to this question can only lie in time but for now, it is a wait and see attitude being taken by all parties involved.
