Immigration Rally in WashingtonOn October 1, 2015, a new federal rule went into effect governing the terms of consumer credit that can be offered to military members and their families.  As of 2013, Kentucky had the 9th largest number of active duty service members in the United States, and the new rule brings the number of military members and their family members in Kentucky potentially receiving protection from these kind of products to nearly 100,000. The types of products covered by the rule include payday loans, credit cards, and private education loans, among others. Lenders have until October 3, 2016 to come into compliance with the new law, and credit card companies have until October 3, 2017.  The rule caps the cost of consumer credit, including interest rates, fees, and insurance premiums to an annual percentage rate of 36 percent.  It also requires creditors to provide military members with terms of their agreement in language they can understand.

This new law is important because members of the military are an especially appealing target to lenders. Once a lender recognizes a potential customer as a new military member, they can be nearly certain that the individual will have a reliable source of income for the remainder of their enlistment contract.  In addition, members of the military tend to be young, stationed far from their natural family support systems, and may be entering into financial agreements for the first time. More than 2 in 5 active duty military members, over 590,000 nationwide, is under age 25. Furthermore, there are federal laws in place ensuring military members repay their debts, along with mechanisms for lenders to garner the military member’s wages involuntarily. In the end, entering into a high-interest loan may mean big profits for lenders—and garnishments of up to 25 percent of the paychecks of hardworking military members.

These new protections are a great start for adding consumer protections to families in Kentucky, but they leave many out.  Such protections should be expanded to the rest of Kentucky’s families, including the 23 percent of Kentucky families with children living below the poverty line, and those living paycheck to paycheck trying to make ends meet.