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The ways predatory lenders are avoiding the 36 percent rate cap on loans to servicemembers under the Military Lending Act are noted in a Dec. 26 comment letter from CFPB, which wants the Defense Department to finalize its proposed MLA rule changes.

In its comment letter, CFPB says "gaps," or loopholes, in current rules "have allowed companies to offer high-cost loans to military families by skirting the 36 percent rate cap and other military-specific credit protections." The bureau also published a report detailing some of those practices. (The DoD proposal is also backed by more than 180 different interest groups, The Hill reported.)

DoD's proposal would broaden MLA rule to cover more products, and it would require all lenders to check a DoD database to find out if a loan applicant is covered by the rule before approving the request for credit.

NAFCU President and CEO Dan Berger, in a Dec. 23 comment letter, told CFPB the proposed rule would be so burdensome that credit unions would no longer be able to provide some products to servicemembers due to interest-rate restrictions that already apply to them. He asked DoD to exempt credit unions from the proposed changes and allow them to continue under existing MLA regulations. As an alternative, he recommended that credit unions' payday alternative loans (PALs) be exempted from the changes. NCUA Chairman Debbie Matz also sought a PALs exemption.

Berger said NAFCU believes Congress, in passing the underlying statute, did not intend to frustrate the ability of fair lenders to provide financial products and services "that are in the best interest of America's military families," Berger wrote.