Protections for Military Customers

Both Federal law and a Department of Defense rule provide that certain types of financing, including payday loans, must include specific safeguards for military personnel. One such protection (for loans secured after October 1, 2007) is that the annual percentage rate offered to men and women serving in the Armed Services cannot be more than 36%.
With very few exceptions, all charges and fees must be included in the rate. Other practices which creditors are barred from using are:

Creditors are legally bound to give certain disclosures to military borrowers regarding the full cost of the loan, including any and all fees and charges, as well as a listing of all rights afforded to the military loan applicants. Any credit agreements which violate these protections are declared null and void.

Even with these safeguards in place, people in the military run the same risks when applying for and accepting a payday type loan as do civilian consumers. The bottom line is payday loans are costly, and even more so if you have to roll-over the initial loan.

The same procedures hold true for military customers; if you have to extend your loan past the normal two week payback agreement, you will have to pay extra fees and charges in addition to what you have already paid. The more times you roll-over the loan, the more you will be charged.

There are resources for financial assistance to military consumers. These aid societies are a legitimate source of funds and should be seriously considered before committing to a payday type loan. Contact the Army Emergency Relief, Navy and Marine Corps Relief Society, Air Force Aid Society, or the Coast Guard Mutual Aid Society for more details and specific application requirements.

Before signing a payday loan contract, there are other options available which might be worth investigating. Friends or family members are sometimes willing and able to help when financial difficulties arise. Also, your bank or local credit union may offer loans with lower rates and costs. Check to see if they have special deals for military borrowers. You might consider taking a cash advance on a credit card; while this can be expensive, it still could be less than using a payday loan.

No matter what type of loan you ultimately decide on, it is important to fully read and understand the terms of your loan agreement. Never sign any contract until you have received a complete breakdown of the costs and fees of the loan. If you need free legal advice about a loan application, contact the legal assistance office for your branch of the military.

Military consumers can contact the Department of Defense, toll-free 24 hours a day, 7 days a week, at 1-800-342-9647, or at www.militaryonesource.com. Information on the Department of Defense rule, alternatives to payday loans, financial planning, and other guidance is available.