About Military Payday Loans
Until the passage of the FY 2007 Military Authorization Act, payday and car title loans could be made to members of the military. Until then, companies could charge customers high interest on loans that were meant to be paid off when the service member received his next paycheck. The new law effectively ended the business of military payday lenders that did a healthy business at offices located near almost every military base in the United States. They were replaced by lenders that changed their habits.
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Significance
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Until the passage of this act, hundreds of thousands of service members were forced to pay outrageous interest and were obligated by some of the most unfair loans available in the U.S. today. But service members have the same obligations as do members of the general public; so payday loans are still available to the military as long as the lenders follow certain guidelines.
Features
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The act prohibited any lender's requirement that a service member set up an allotment to receive a loan, along with the following:
It no longer allowed a service member to use his vehicle as security on a loan because of abuses in connection with automobile loans.
It precluded a lender from rolling over or consolidating a loan by a service member if the loan was from the same company.
It no longer allowed a service member to waive rights under the Service members' Civil Relief Act.
It prohibits lenders from charging service members fees for early payoffs.
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Time Frame
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The act was not meant to be retroactive, so any loans made to service members prior to its enactment were meant to be in full force.
Size
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The average size of a military payday loan was $500 to $1,000, but they could amount to $10,000 given the proper circumstances. Prior to the act's passage, a loan for a higher amount would ordinarily be extended at the borrower's request.
Considerations
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To avoid the specter of charging usurious interest on loans to members of the military, many companies now charge a fixed fee instead of interest. The fee varies from $10 to $30 per $100 of the loan, and applies for up to 14 days when the next paycheck is received.
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