Pentagon Eyes CU-Backed Exemptions for Military Loan Caps

WASHINGTON – The Department of Defense is expected to propose rules later this week that would apply the new 36% maximum rate on loans to military personnel to payday loans, title loans and refund anticipation loans; thereby exempting add-on services like GAP insurance, credit insurance, identity theft insurance, overdraft privileges and courtesy pay fees, as requested by credit unions. But the Pentagon has rejected a plea by the banking lobby for a broad exemption for all loans provided by federally insured financial institutions. A draft of the proposal reviewed by The Credit Union Journal, is expected to be issued later this week for public comment. Fred Becker, president of NAFCU, which has been involved in drafting the rules, said NAFCU is concerned that the DoD not set a wide net that would restrict legitimate loan practices relied on by service members. “We hope credit unions will be able to continue offering the traditional loan products that they have been able to provide for years to members of the military,” Becker said yesterday. CUNA had urged the DoD to exempt a variety of fees and charges when calculating the new 36% rate for loans to military personnel, including loan add-ons and supplemental services, like credit insurance and courtesy pay fees.