The Military Lending Act Shortcomings

Many may remember Holly Petraeus, shortly after being named the Consumer Financial Protection Bureau’s assistant director, spoke of the financial difficulties many members of our military face. She cited deployments, change of duty stations, and other emergencies that can result in unplanned and unique financial difficulties. As she explained, there is a woeful shortage of adequate resources available to avoid these problems. It comes as little surprise then that some members of military turn to bankruptcy to help them overcome some of those difficult financial problems.

Still, Petraeus moved forward with the Military Lending Act, which put into place protections against abusive lending practices designed to target vulnerable service members and their families. Even as the Military Lending Act has been effective at stopping some lending abuses, unethical lenders continue to find ways around the law, which allows them to continue with their “business as usual” practices. This has led to many wondering where they can turn for financial relief. After all, the law, while effective when it’s applied, isn’t the first of its kind. Already, the Servicemembers Civil Relief Act is in place and has been for decades; yet it did not prevent JPMorgan Chase from serving foreclosures notices to active service members while also charging outrageous interest and fees to more than 5,000 active military members last year. It’s been ordered to repay millions to affected military members. The laws, while effective in some instances, simply are not enough.

As a result, bankruptcy, for many, remains the best option in what’s often a desperate situation. Contrary to what many might believe, this provides the best opportunity for members of the military who are wishing to hit the reset button on their finances.  This is especially important since often, the military is targeted by unethical businesses.

Shady businesses who push financial products with higher interest rates and higher overall costs often target the military. They’re considered easy prey because there is a limited chance of lay-offs, members of our military, while determined, strong and loyal, can sometimes not have the financial savvy of someone who’s older and as a result, they may underestimate the importance of reading the so-called “fine print”. It’s for all of those reasons that they’re often targeted for these types of shady financial products. “Sadly, the military has proved to be a targeted population,” says Holly Petraeus, who served six years with the Better Business Bureau’s outreach program to military families.

It’s important to note that Petraeus is a financial powerhouse who has a strong background in all things military. Her husband, David Petraeus, is the former Director of the Central Intelligence Agency and has his own impressive military background. Clearly, her efforts are genuine, but they’re simply not enough – at least, not yet.

One example is her efforts of putting into place new laws. Even there she’s been limited. The newest law only covers so-called payday loans, some short-term closed-end loans and short-term car loans, as well as tax refund anticipation loans.

That leaves bankruptcy. A chapter 7 bankruptcy remains the one viable and complete alternative available not only to service members, but Americans, who need to simply start over; not only in some areas of their finance, but as a whole. Bankruptcy is not the overwhelming, time consuming and extended solution. These days, bankruptcy is more streamlined than many expect. You aren’t required to appear before a judge to plead your case or explain anything. There is one brief appearance; it typically takes a few minutes and is for the purposes of ensuring you are who you say you are and that you are the one seeking the bankruptcy relief. As a bankruptcy attorney, I can tell you that service members and civilians most often share the same common belief after a bankruptcy: I wish I hadn’t waited so long.

If you’re frustrated with the inability of righting the wrongs with creditors and feel like you’re only getting deeper into debt, contact me today. I know I can help you pick up the pieces and give those finances that much-needed restart. Our lives were never supposed to be overwhelmed with worries about money, finances and creditors.

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