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DOD’s Financial Walter Reed
The Pentagon’s failure to protect service members and their dependents from rapacious credit card companies is the financial equivalent of the Walter Reed scandal. Congress instructed the Pentagon to prohibit lending companies from offering military personnel and their families loans with financially punishing terms and conditions. The law specified that payday and similar loans be banned and that other forms of consumer credit be banned if they carry annual interest rates over 36% including all the fees and charges that finance companies love to tack on to deceptively low APRs.

Instead of really protecting their people, the Defense Department proposed prohibiting most payday loans but left credit cards, costly checking account overdraft protection, military installment loans and other high-priced loans completely untouched – the equivalent of slapping a new coat of paint on moldy, rotting walls. Not only does DOD’s proposed rule not cap credit card interest rates, it doesn’t even mention the issue. In short, the Pentagon simply swept abusive credit card practices under the rug.

Late fees, over-the-limit fees, and cash advance fees are only some of the methods credit card companies use to charge consumers hundreds of percent interest a year. If a soldier is at their credit limit and uses their card to buy a cappuccino, they may just have unknowingly bought a $35 cup of coffee because of an over-the-limit fee. If the penalty charge isn’t paid off promptly, it can be added on again every month – with interest – in addition to whatever other fees the card provider is charging.

The Pentagon’s proposed rule provides palliative platitudes while allowing credit card companies and other usurious lenders unfettered reign to prey on soldiers’ wallets and financial future. The leadership that approved the proposed rule failed to meet their Congressional duties and they failed the military personnel for whom they are responsible. They should be ashamed.

See CRE RegWeek “DOD Exemption of Credit Cards From the 36% Interest Cap”

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