I mentioned in a prior section that the Pentagon was putting pressure on Congress to take action to protect military personnel and their families. That pressure and an outcry from the public prompted swift action by a Congress that had heretofore ignored the problem. As you may know, amendments to bills in Congress don’t have to relate to the subject matter of the bill being amended. That’s not the case in most state legislative bodies. But, that unusual rule in Congress has now paid dividends for consumers at least this once. An amendment was offered by Senator Jim Talent (R-MO) to the Department of Defense appropriations bill that has now become law. It will protect military personnel and their families against the predations of payday lenders.

This will not only protect members of the military, which is obviously unbelievably important in its own right, but it will provoke needed debate on broader issues of consumer protection. Congress has finally recognized that binding mandatory arbitration provisions are unfair as applied to all members of the military who deal with these loan sharks. How does that correlate with the claim made by Corporate America that binding arbitration is fairer, cheaper, and better for consumers who deal with lenders? It should be undisputed that mandatory, binding arbitration is unfair in any type consumer transaction between a consumer and a large corporation. So now, Congress has passed one of the most important pieces of consumer legislation in the few past decades. The law’s highlights include:

• An Interest Rate Cap that prohibits any lender from imposing an annual percentage rate of interest of more than 36% on loans to members of the armed forces stationed anywhere in the world and/or their dependents. Interest is defined to include all extra charges and fees of any kind, including the sale of related products like credit insurance. This requirement complements existing federal law, which requires lenders to lower interest rates to 6% on loans that Service members open before they enlist.

• A prohibition on lenders from basing loans to Service members on the writing of checks without adequate funds in the bank to cover the check, or on electronic account access or wage allotments that allow lenders priority access to bank accounts or military pay. Loans secured by title to the Service member’s vehicle (Car Title Loans) are also prohibited.

• A prohibition against Binding Mandatory Arbitration Clauses and any other type of waiver of any other right to seek legal recourse.

Obviously, the first two items are extremely important, but the most significant feature deals with arbitration. Prohibiting arbitration is a major victory for consumers. For anyone interested the bill, it can be found at: http://naca.net/MilitaryPaydayLoanLaw.pdf