DOD legislation brings relief to Airmen's finances

  • Published
  • By Airman 1st Class Spencer Gallien
  • 23rd Wing Public Affairs
MOODY AIR FORCE BASE, Ga. --  The Department of Defense has implemented a new regulation affecting all Airmen in an effort to alleviate financial issues some servicemembers are incurring.

The "Limitations on Terms of Consumer Credit Extended to Service Members and Dependents" legislation became effective Oct. 1, and restricts the terms of certain credit extensions to active duty servicemembers and dependents.

"Since 2004, the DOD has collected and studied information on various high-cost lending products including payday loans, rent-to-own contracts, vehicle title loans and military installment loans," said Capt. Jason Sopko, 23rd Wing Legal Office chief of civil law. "The result of this study is new legislation to help Airmen stay out of predatory lending traps."

The primary benefit of the new legislation is a limitation cap of 36 percent for maximum annual percentage rates for military members. The percentage cap includes interest, fees, credit service charges, credit renewal charges, and fees for debt cancellation or debt suspension and agreements.

"The legislation also requires creditors to disclose to borrowers the cost of a transaction as a total dollar amount, which must be given before the borrower becomes obligated into the transaction," said Staff Sgt. Henry Jenkins, 23rd Wing Legal Office NCO in-charge of civil law.

During its investigation, the DOD found some Airmen were taking out one high annual percentage rate loan to pay off a different high APR loan, also called a rollover, Sergeant Jenkins said. In the end, Airmen were paying up to five times the amount of the actual loan.

"A DOD survey showed these types of loans cause more stress than deployments, health concerns, life events and personal relationships," said Sergeant Jenkins. "Servicemembers also had a spike in security clearance denials due to financial issues."

However, there are some disadvantages and limitations to the legislation, said Captain Sopko. The law only applies to credit created by a servicemember or dependent on or after Oct. 1, 2007. Loans in excess of 91 days are exempt from MAPR, and lastly lenders who cannot adequately cover the risk of a 36 percent interest rate can stop providing services to military members and dependents.

"If a servicemember or dependent is looking to obtain a loan, they should contact the Airman and Family Readiness Center first," said Captain Sopko. "They have a number of programs to help members dealing with financial situations, and can give information on how to manage finances."

"I would also like to urge every Airman on base to make an appointment to see an attorney at the legal office before signing any kind of paperwork dealing with a loan," he said. "The best way to avoid the perils of those types of short term loans is to find an alternate loan product that meets your needs."

For more information about the new legislation go to the Seton Resource Center Website at: http://www.setonresourcecenter.com/register/2007/Aug/31/50580a.pdf.