For all their talk about about having full sovereignty when it comes to issuing loans there are a few groups that even the Native American lenders will not touch. One of those groups is children. Obviously if you issue a loan to a 12 year old they won't be able to repay the loan and it would be ridiculous to even consider the fact that they would be asked to pay. So kids are off limits to lenders.
Surprisingly, so are members of the U.S. Armed Forces. It's strange, the weakest and the strongest of our society are the two big groups that can't be issued a high cost short-term loan: the children and the warriors.
It wasn't always this way, if you went back 20 years ago there were no laws that would treat soldiers or sailors in any different manner than the rest of the U.S. population. The sea change took place after the invasion of Afghanistan in October of 2001 and the subsequent invasion of Iraq in March of 2003. Both of these wars would stretch on for many years, and the cost to our fighting men and women would be immense.
Unlike so many of our past wars this war was fought over a long period of time and by a (relatively) very small fraction of our population. This enormous burden fell to our soldiers and all of the activity that followed the invasions, including preparation for deployment, deployment, active duty theaters of war, and all the accompanying tragedy, carnage, chaos, and huge emotional problems that will come with those experiences.
When you look at the average pay for a soldier and combine that with the tremendous distractions and discomforts they faced over years of war it's no surprise that the financial situation of these men and women started to collapse. Just like the rest of society the increasing cost of food, gas, utilities and products created a situation where they needed to borrow money to keep up. And into that breach stepped thousands of payday loan stores.
By the way, just a note, these lenders that got our soldiers into debt for the most part were not Native American loan companies. They were the old fashioned brick and mortar payday loan stores that we watched emerge across the strip malls of America all through the 1990's.
In what seemed like an easy and reasonable option for quick financing many soldiers turned to these loan stores to get some spending cash, but of course this decision quickly converted to a growing nightmare.
The soldiers who were fighting for this country, getting killed, getting wounded, losing friends, enduring hardships beyond what any of us face during our worst times, were getting financial eviscerated by these thousands of payday loan stores and for those creeps running those lending outfits (the owners and operators) may they rot.
Many soldiers, tens of thousands or more, started to get into severe financial trouble with bankruptcies, foreclosures, late fees, closed checking accounts, car repossessions and all the extremely negative emotional baggage that comes with those situations. And don't forget the whole time this is taking place these are the people who are fighting for us, the citizens of the United States. At some point the U.S. Congress figured out that so many of our soldiers were falling into this trap and passed a law specifically forbidding the issuance of short-term debt products to active military personnel.
This law is the Military Lending Act (or MLA) and it was passed into law by the U.S. Congress in 2007. This law bans any lender from issuing debt to an active service member, which is another term for active duty military personnel from any branch of the U.S. Armed Forces and that does include active duty National Guard and Active Army Reservists, that exceeds the 36% annual percentage rate.
That would mean a loan with a 37% APR or higher would be a substantial violation of federal law subject to criminal prosecution, fines and prison time. Just an aside, isn't it funny that for the fighting men and women of our nation the U.S. Congress awoke to look at the short-term lending industry for what it actually is, which is nothing less than predatory lending. While I do believe our active duty warriors deserve special recognition and thanks, it's just interesting that for the rest of the population (the civilian side that you are most likely a part of) we are apparently deserving and readily available to pay the outlandish interest and fees that the soldiers are being shielded from.
This is where the Native American lenders come into the situation. Nearly all of the time the tribal lenders will say they are free from following state or federal regulations, rules, laws, ordinances, executive orders and directives due to their fully sovereign status, which essentially creates nation status for the hundreds of tribal lands around the country.
This full sovereignty is protected and maintained by the U.S. State Department and the only body in the United States that has retained any legal right (at least on paper) to govern what happens on tribal lands (and with the federally recognized tribes themselves) is the United States Congress. Technically, the legal impact of the U.S. President and the U.S. Supreme Court do not extend to this situation, as it is a unique legal arrangement with the ancestors of the indigenous people of what became the United States of America.
What makes the Military Lending Act a very special situation is that it was the U.S. Congress that passed this law and therefore it is one of the very rare instances where legal impacts from Washington did in fact directly change the lending standards of the tribes.
The tribes all complied and now part of their application process is to request, in absolutely stark terms, whether or not the person applying for the loan is active in any branch of the U.S. Armed Forces, it's a simple yes or no question.
When an applicant answers "yes" to that question they will automatically be out of the running for any loan product from the tribes. The only exception would be if a tribe offered an introductory loan with a 36% APR or less, but I don't believe there is any tribal lender with this type of low interest rate lending program, especially for a first time customer.
The tribal lending websites also make mention of this fact (they don't mention the MLA law, but they do clearly state that if you are currently part of the uniform military then you are not allowed to get a loan) and so does the loan application itself. From what I've seen on these loan applications the tribes are not making a direct mention of the 2007 law but instead are just implementing the law without mentioning it. I'm pretty sure that the tribes never like to have an outside law or influence making changes for their business practices, but in this case they realize it is the U.S. Congress and they're not challenging the legal status.
The question then becomes what can active military personnel do for a source of loans? The answer is to just look for those military loans, there are many companies that now have specialized lending programs (and that's code speak for lower interest rates if you're in the Armed Forces) just for soldiers, sailors, marines and airmen. Some of the lenders who are offering these military loans are AvantCredit USAA Bank Loans, US Military Lending Corp and many others. When you try to find these military lenders online it's not too difficult and that's the way to go if you are a service member.
It's a great thing that the Congress recognized, understood and took action to protect our warriors from being taken advantage of by extraordinary interest rates. It's bad enough that the rest of society faces these type of loans in the marketplace each day but for those who put their life on the line protecting the rest of us it was simply unacceptable.
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