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Indiana Launches Toolkit to Protect Military from Payday Loans

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The Indiana Attorney General has just released a legal toolkit that will help state Attorneys General protect military service members from predatory lending, such as unscrupulous payday loan lenders.

Greg Zoeller, Indiana’s Attorney General, partnered with the Department of Justice and the Financial Fraud Enforcement Task Force in order to develop the toolkit. Other states’ Attorneys General also helped develop the toolkit.

Similar to a guide, the toolkit outlines issues impacting the military community and also shows how states’ consumer protection regulators can handle financial predators. It will guide legal professionals with relevant statutes and regulations that can help in law cases against unethical lenders.

There are several special components of the toolkit that will help service members. First, there is the active-duty alert, which informs businesses that a borrower has been deployed. Second, there is the reminder that active duty personnel can have their interest rates for most types of loans capped at 6 percent, provided they properly notify their creditors. Third, there is the ability to terminate vehicle and property leases. Finally, there is foreclosure and eviction relief protection for deployed personnel.

In the press release, Zoeller explained that unscrupulous lenders target military personnel and their families since they reliably receive steady paychecks. He said that it is important for both state and federal officials to use the resources that are available to them in order to crack down on predatory lending that targets individuals who serve the country.

However, the 2007 Military Lending Act was created to protect service personnel from predatory lending, such as illegal payday loans. This prompts the question of whether or not the toolkit is even necessary in the face of already existing legislation.

Abigail Kuzma, Director of the Consumer Protection Division, told loans.org that the toolkit is not a reaction to the Military Lending Act’s possible loopholes or any other type of legislation.

She said that the toolkit is the result of a meeting of the Financial Fraud Protection Task Force, which came to the conclusion that military service members are vulnerable to scams and often fall victim to financial fraud.

Kuzma stated that her office makes a major effort to do outreach to military members who are deployed, since, while deployed, they may be unable to respond to or report incidents of predatory lending.

She went on to state that the military was involved in the creation of the toolkit since there are actually three versions of the toolkit, one of which is for the Judge Advocate General. The remaining two versions of the toolkit are available for Attorneys General and US Attorney Offices.

Director Kuzma elaborated further on the creation of the toolkit.

“We have a lot of lending abuses,” she said. “We don’t have a record of a great deal of lending abuses against military service members. One of the reasons this toolkit is important is because military service members need to know Attorneys General offices are out there. Certainly mortgage lending issues and other financial abuses were identified as one of the top complaint areas within the military.”

When asked about veterans, Kuzma told loans.org why they and existing military service members are so vulnerable to predatory lending.

“Many of them are very young, so when you’re talking about an 18 year old in the military, you’re likely to be talking about someone who is financially uneducated and inexperienced,” she said. “They have a steady paycheck, so a payday loan lender has a paycheck they can garnish. So you take those two pieces together and that’s not a happy situation for military service members.”

Another reason why military service members are so sought by predatory lenders is that they are less likely to seek financial help because informing their superiors of debt or credit issues can negatively impact their service, said Kuzma. Military personnel can be denied promotions and even receive demotions in some instances.

Director Kuzma expects that Attorneys General across the country will implement the toolkit in such a way that there can be updates to it as law enforcement gains more experience defending military personnel against predatory lenders.

(Interview with Director Kuzma conducted by Isaac Juarez)

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