by Deepak Gupta
Wanna give the Pentagon a piece of your mind? No, not about the War in Iraq. In today's Federal Register, the Department of Defense is issuing a notice of proposed rulemaking to implement the landmark predatory lending protections enacted as part of the defense authorization bill earlier this year. As many of you are probably aware, this legislation is a big deal; among other things, it included a ban on arbitration clauses and a usury cap, and may signal a new willingness on the part of Congress to limit mandatory binding arbitration in consumer contracts and rein in predatory lending abuses. The impetus was a DoD report on predatory lending, which drew heavily on an empirical study by co-blogger Christopher Peterson. (We've previously discussed the issue here, here, here, here, here, and here.)
The proposed rules cover a lot of ground. Consumer advocates watching this issue had feared that the DoD would give in to industry pressure to severely limit the scope of the protections in the new bill; that appears to be what has happened. For example, the rules define the scope of the protections so that they would not cover residential mortgages, home equity loans, auto finance loans, and a wide range of transactions other than payday loans, refund anticipation loans (a.k.a. RALs), and auto title lending. The regs also set strict duration limits and monetary limits on the amount of loans included in the definition of "payday loans."
Comments on the NPRM are due by June 11, 2007. At this link, you can read the comments previously filed by the consumers groups that have been leading the charge on this issue: the National Consumer Law Center, Consumer Federation of America, Center for Responsible Lending, and Consumers Union, and the National Association of Consumer Advocates.