Lawmakers are attempting to stall a sweeping Defense Department policy change that would give troops more protection from high-cost debt, advocates say.
Last September, defense officials proposed new rules that would expand the types of credit covered by the maximum 36-percent interest rate that can be charged to service members and their dependents.
The new rules, which have not yet been published in the Federal Register, would apply to most forms of credit, including credit cards, deposit advance loans, installment loans and unsecured open-end lines of credit.
A defense official said the rules are nearing completion, and will be forwarded to the Office of Management and Budget for review, with final release expected this summer.
But lawmakers want to delay the process. They're asking for another report on the rule-making, due by March 1, 2016, and further direct that the final rule can't take effect until 60 days after that report is submitted to Congress.
The requirement is the work of the House Armed Services Committee's military personnel panel, which inserted the requirement into the committee's version of the fiscal 2016 defense authorization bill. The full committee is scheduled to consider the bill on Wednesday.
Congress passed the Military Lending Act in 2006 to provide protection from predatory lenders that charge high interest rates to troops — upward of 400 percent in some cases.
In their initial implementation of the law, defense officials took a relatively narrow approach, limiting the types of credit covered by the new law to payday loans, vehicle title loans and tax refund anticipation loans.
Almost a decade later, lawmakers say "the law has been largely effective in curbing predatory lending to covered borrowers," but acknowledge that some predatory lenders have modified their products to avoid coverage by DoD's rules.
Even so, lawmakers say they are "concerned" with DoD's efforts to update its implementation rules, which is why they want the delay and the report.
"This is a clear attempt to delay" the final rule, said Tom Feltner, director of financial services for the Consumer Federation of America. "The final rule has already been well-researched by DoD."
As previously mandated by Congress, DoD has already reported to lawmakers on the need to expand the implementation of the Military Lending Act — a full year ago, in April 2014.
"We're hoping members of the House Armed Services Committee will stand with service members on this and not with payday lenders," Feltner said.
The proposed rule would extend DoD's implementation of the MLA to include all types of credit that are already subject to the protections of the Truth in Lending Act and were not specifically excluded from the Military Lending Act.
The 36-percent maximum annual percentage rate would cover all interest and fees associated with a loan. For credit cards, creditors could exclude from the charges included in the APR any bonafide fees that are reasonable and usual.
The protections do not apply to mortgages or purchase-money loans —– for example, a vehicle loan.
Those who lend to a service member or family member must provide additional disclosures, such as a statement that the borrower should seek other options, to include financial counseling and assistance from the military relief societies.
A number of lenders have expressed opposition to the new proposed rule. An estimated 40,000 creditors would be affected by the expansion, and many contend it would block service members from using options that meet needs other sources of credit cannot.
One installment lender, a retired Army first sergeant said the proposed rule will cause problems for troops.
"If a service member needs $300, $400, $500, where can he go?" he said in an earlier interview, adding that the effect of the new rules would be that "the pawn brokers are going to make more money."
The lender said that before he loans money to a service member, he makes sure the member has first tried to get help somewhere else, such as Army Emergency Relief, or a local credit union.
Karen has covered military families, quality of life and consumer issues for Military Times for more than 30 years, and is co-author of a chapter on media coverage of military families in the book "A Battle Plan for Supporting Military Families." She previously worked for newspapers in Guam, Norfolk, Jacksonville, Fla., and Athens, Ga.
