Bipartisan legislation would expand Military Lending Act protections on payday and car title loans to all veterans and consumers

INDIANA  – Hoosiers for Responsible Lending applauds the introduction of the Veterans and Consumers Fair Credit Act of 2021 in the U.S. House of Representatives. This legislation would extend the 36 percent APR interest rate cap on payday and car title loans in the Military Lending Act (MLA) to cover all citizens. 

The bipartisan House bill was introduced on November 17 and would achieve a major policy goal of Hoosiers for Responsible Lending. Among those who introduced the bill, Representative André Carson is an original sponsor for the Veterans and Consumers Fair Credit Act. 

“We thank Congressman Carson for supporting this bipartisan legislation that takes an important step toward eliminating predatory lending in Indiana and across the country,” said Andy Nielsen, Senior Policy Analyst with the Indiana Institute for Working Families and HRL member. “High-cost lending in our state traps Hoosiers in a cycle of debt that many struggle to leave, jeopardizing the economic security of individuals and families and the health of our communities. Congress already recognized the need to enact strong interest rate caps that protect our active duty military, and this protection must be extended to all consumers.”

Hoosiers for Responsible Lending was created by a network of advocates working to empower Hoosiers who have been affected by any form of predatory lending. HRL raises awareness of predatory practices across Indiana in order to hold lenders accountable and create attainable pathways to wealth building for all Hoosiers.

General James Bauerle of Hoosiers for Responsible Lending said, “The Reserve and National Guard are not protected today by the Military Lending Act. This adversely affects these units readiness, and capability. Security clearances can be removed or not granted based upon bad credit. Commanders and full time support get calls and have to waste time dealing with lenders, families, and the service member on this issue– time wasted that should be used for preparedness. This is bad for America because these men and women help in every state when needed and are not federalized. Every state has benefited from our Reserve Components– food banks, nursing homes, and hospitals to name a few. Some of these service members get trapped into high interest short term loans– the proposed Veterans and Consumers Fair Credit Act (VCFCA) will protect them and their families. They deserve our thanks and protection.”

In addition to veterans organizations, the HRL alliance includes faith communities, consumer groups, and social service providers who recognize both the benefits of equitable, responsible lending and the damages of predatory lending.

Jessica Love, executive director of Prosperity Indiana and HRL member, said, “Even beyond its implications for veterans, this bill would, once and for all, put all Hoosiers on equal footing when it comes to protections against these predatory products. For most, it’s unclear when they sign on the dotted line that they’re placing a stranglehold on their family’s economic future for weeks, months and years to come. This federal cap puts the right limit back on these types of loans and would have a major impact on families and communities across the state.”

Payday and car-title lenders target veteransolder personsrural consumers, and communities of color promising quick access to money in a pinch. But these loans often come with triple-digit interest rates that make it nearly impossible to pay back the loan. This leads to about 80 percent of borrowers having to take out another payday loan to repay the original loan. 

Every time a person takes out a new loan to pay off the prior one, the overall amount of debt increases as interest and fees pile on, creating a “debt trap” that few borrowers are able to escape. According to the Center for Responsible Lending, the debt trap is draining $70,632,672 per year from Indiana and $8 billion for the entire U.S.

The Indiana Institute for Working Families polling data shows that nearly nine-in-ten (88 percent) of Hoosier voters support capping the maximum interest on payday loans to 36 percent APR as the Veterans and Consumers Fair Credit Act does. 87 percent say payday loans are a “financial burden”, and 84 percent think they are “harmful.”