US defense department plans broad ban on high-cost loans

Acknowledging that a previous law did not go far enough, the Defense Department said it needs to expand rules to protect service members from high-cost lenders

The Department of Defense, attempting to thwart the ever-changing tactics of high-cost lenders, plans to dramatically broaden a federal law that sought to protect service members by capping the interest rate on loans made to troops.

When the Military Lending Act was enacted in 2007, it narrowly focused on how much interest lenders could charge on two types of loans: payday and auto-title. But as ProPublica and Marketplace reported last year, high-cost lenders easily circumvented the law, peddling credit from stores that often line the streets near military bases. In a newly released report to Congress, the Defense Department acknowledged that the law has proven inadequate and said it is working on new, "more comprehensive" rules.

The report, completed in April, said a survey of service members found the use of high-cost loans is widespread. Under current rules, the Military Lending Act (MLA) caps certain categories of loans at a 36 percent annual percentage rate. But the Defense Department's survey found that 11 percent of service members reported taking out a loan above that limit in the past year.

Service members are prime targets for high-cost lenders, the report says. They often aren't financially savvy—"generally high school graduates who may have started college." They're young: 43 percent of service members are 25 years old or younger. And they tend to start families earlier, adding to their financial pressures. From the results of the survey, the Defense Department estimated that up to a quarter of service members "may face emergency financial short-falls and indicate difficulties managing their finances and avoiding problems with credit."

In response to crackdowns by federal and state regulators, high-cost lenders have been busy transforming their offerings over the past several years. Instead of the typical payday loan, which carries an annual rate above 300 percent and is due in full after two weeks, lenders have increasingly been offering installment loans that last several months. They, too, can have sky-high annual rates, but the rate on installment loans isn't capped under the MLA. Neither is the rate for open-ended credit: a lender can legally offer a credit line with a 300 percent APR to a soldier.

Because they're not covered by the MLA, installment lenders are also free to lard loans with nearly useless insurance products that serve mainly to boost the cost of the loan. The report notes that if the MLA were extended to cover installment loans, these types of add-on products would be limited. Under the MLA, the Defense Department has the power to define what sorts of loans are covered.

"[W]ithout revising the definitions of credit in the MLA to encompass installment and open end credit, the MLA will lose its effectiveness," the report says. But if the DoD simply prohibited installment loans with an APR above 36 percent, lenders might find another type of loan to circumvent the law. Accordingly, the Defense Department concludes, "The complexity of the marketplace appears to be better accommodated with a more comprehensive approach." As indicated in the report, such an approach would ban any loans above 36 percent, perhaps with a few special exclusions.

Meanwhile, the situation is very different for high-cost loans targeted at everybody else. There is no federal law limiting high-cost loans to civilians, but the Consumer Financial Protection Bureau is working on new rules for payday lenders that will affect all consumers. "I think that the challenges of defining high-cost credit under the MLA are the same challenges of defining high-cost credit for the civilian population," said Tom Feltner, director of financial services at the Consumer Federation of America.

But where the Defense Department can simply institute a broad 36 percent rate cap, the CFPB's hands are tied. The 2010 financial reform bill that created the agency forbade it from capping interest rates. That makes CFPB's job much more of a challenge, said Feltner.



Building a Better India-Part1: How to create a smaller and smarter government

An essential step in delivering on the government's promise of maximum governance and minimum government is the re-organisation of existing power structures. Here are some ideas for the Modi government. This is the first part of a series which shall follow

The formation of Modi government has the financial markets in a tizzy and bureaucrats on their toes. Much is expected in the coming weeks in the form of announcements and key posts but all eyes are on the upcoming budget and as some have speculated, a cabinet expansion. The following list is a pared down version of a larger set of ideas, some of which were settled in the initial government formation after 26 May 2014.

Here, we take a look at some out of the box ideas for streamlining and specialising the work flow in the government:
a. The Ministry of Home should be rechristened the Ministry of Internal Security.

b. Create a new ministry exclusively for defence production, procurement and requirements which will work directly under the Prime Minister to be called Ministry of Defence Requirements.

c. Create a new Ministry for Development of Electronics and White Goods Manufacturing again to work directly under P.M.

d. Create a separate Ministry for Development of Animal husbandry, Dairy farming, Poultry and Fisheries with separate departments to deal with each one of them.

e. Create a new Ministry for Cash crops with separate departments for sugarcane, cotton, oil seeds, pulses, rubber, tea, coffee, horticulture, fruits, vegetables, co-operative farming and food processing.

f. Create a new Ministry of Irrigation and Water Resources with the existing Ministry of Water Resources to be subsumed by it. The responsibility of this ministry should be to to go all out in creating permanent irrigation facilities (Canals, sub canals, digging reservoirs and water bore wells ) for lands having only one monsoon based crop per year particularly in eastern states of Bihar, central and east U.P, Jharkhand, Orissa etc

g. Ministry of Minerals and Natural Resources- This new ministry will subsume the existing ministries of Coal, Ministry of Mines and Ministry of Petroleum and Natural gases to bring all of these under one umbrella for quick and better coordination.

h. Ministry of Industry and Public Sector Enterprises- it will subsume the existing Ministry of Steel and Ministry of Textiles. The separate ministry of disinvestment, ministry of chemicals and fertilizers to be abolished.

i. Ministry of Power to be renamed as Ministry of Energy and it will subsume the Ministry of New and Renewable energy and Atomic energy.

j. Ministry of Tourism to be renamed as Ministry of Tourism and Hospitality services- so as to also look after development of hotels, motels, guest houses and restaurants.

k. Ministry of Culture should be merged with Ministry of Youth Affairs and Sports.

l. Ministry of Commerce and Industry should be renamed as Ministry of Commerce and Trade.

m. Ministry of Communication and Information Technology should be disbanded and communication affairs should be merged with Ministry of Information and Broadcasting and Information Technology to be clubbed with Ministry of Science and Technology.

n. Ministry of Minority Affairs and Ministry of Tribal Affairs should be merged and renamed as Ministry for the Welfare of Underprivileged Citizens.

o. Ministry of Housing and Urban poverty alleviation should be renamed as Ministry of Housing Development with exclusive focus on development of housing.

p. Ministry of Women and Child development should be merged with ministry of Health and Family welfare.

q. Ministry of Personnel, Public grievances and Pensions should be renamed as Ministry for Welfare of Govt employees.

r. Create two separate ministries—one for Public complaints and grievances and another for Grievances of business, commerce and industry

s. Create a new Ministry called Ministry of Coordination to ensure coordination between centre and states.

Needless to say, some of these ideas may seem like a mere renaming exercise, but in the larger context, it helps provide focus and better distribution of responsibilities as new departments crop up with a growing economy. Be that as it may, a running discussion on these issues is the order of the day when the citizens of our country have more at stake in the government's performance than ever before.

(Kolkata-based Dalbir Chhibbar practised as a CA till 1990 and later started his own buinsess)




3 years ago

Sorry, but this is just tinkering and renaming. There's no big idea at all.


3 years ago

Some indicative ideas. It could be much improved by aborate each "Ministry" with respective maximum staffing, Mission, Key Responsibility Areas and Key Performance Parameters bounded by time.

Nagesh Kini

3 years ago

Suggestions great -
1, Renaming gets to old wine in new bottles! Makes for no difference whatsoever.
2. what's the point in having some more ministries to make a jumbo cabinet.
3. what is the PMO and Cabinet Secretariat other than for "cordination" ?
4. If the PM takes on every second ministry why call him a PM at all?

Narendra Doshi

3 years ago

CA businessman Dalbir's ALL suggestions to Shri Narendra Modi are worth TOTAL implementation.Hope it is sent o him, also.

NHAI starts uploading PPP project details on its portal

In what could be termed as new hope for complete transparency in Public-Private-Partnership projects, the National Highway Authority started uploading on its website contents defined by the task force under Section 4 of RTI Act

Moneylife, has been campaigning for transparency in public-private-partnerships (PPPs) between the government and corporate bodies like Infosys, Reliance Infrastructure and Tata Consultancy Services (TCS) that have entered into crucial partnerships for public services like highways, roads, passports and electronic service delivery. This comes as a ray of hope with the Ministry of Road, Transport & Highways announcing complete transparency of NHAI projects.


The press release issued by the Press Information Bureau (PIB) on 3 June 2014, states, “National Highway Authority of India (NHAI) proposes to place all information relating to projects taken up by them under PPP mode in the public domain to be available on a link”


The information would include listings in the Section 4 of the Right to Information (RTI) Act. This means, information regarding every bit of the PPP project, like copy of the agreement, details of every stage of the project, toll collection at toll plazas, accident statistics, internal correspondence regarding the project and so on would be put up on the website at regular intervals.


The press note elaborates, “specific project details can be obtained by typing the name of the particular stretch/ project implementation unit (PIU) along with this link. Most Project Specific Websites have already been launched and the remaining will be launched by 15 July 2014.”


“Details will be given about all stages of the project development like construction, operation and maintenance. Each PIU will have a separate link. Information for each project will include name of the Concessionaire, Independent Engineer and Safety Consultant, Project location details, location of Toll Plaza, availability of Ambulance and emergency telephone numbers of nearest Police Station, Trauma Centre etc.”


“The Concession Agreement between NHAI and the Concessionaire, and between NHAI and Independent Engineer (IE) / Safety Consultants will also be hosted on this website. Complete database of the correspondence exchanged between the IE and the Concessionaire, between NHAI and Independent Engineer on all aspects of the project, along with details of court cases and arbitration awards etc. will be uploaded on the website. Report of IE on important parameters like quality of construction, quality of maintenance, road safety and tolling, Correspondence between IE and the Concessionaire of these projects will also be available. In addition it will contain information, along with photographs, about the progress of work, major developments of the project including change of scope and change of alignment,” the release said.


NHAI has also opened on its website an e-complaints section for commuters. The press release informs, “Road users and the general public can lodge their complaints, if any, directly on the website in the user friendly form. On uploading the form, email to the concerned officer in the PIU, IE and NHAI HQ will be sent and road users will be kept posted of the action taken on their complaints. Complaints received through letters, telephonically or on the Facebook page of NHAI will also be posted on the website. Redressal of these complaints done by NHAI / IE / Concessionaire will also be posted on the website. These websites with all information relating to PIUs are being registered with the leading search engines and can also be accessed through NHAI’s website.’’


Venkatesh Nayak, programme coordinator of Commonwealth Human Rights Initiative (CHRI), who has been a part of the Task Force set up by the Department of Personnel and Training (DoPT) in 2011, comprising government and civil society organizations across the country termed this step by NHAI, “progressive”. He says, “These guidelines require disclosure of concessions agreements, maintenance manuals, all payments made, tolls collected and a wealth of other information about PPPs without waiting for any individual to make a formal request.’’


Nayak opines that now it is left to the citizens and activists to simplify the technical language in PPP agreements, ensure all other PPPs follow the NHAI route and ensure that information commissions refer to this new development while deciding appeals on non-transparency in PPPs.


I went through the NHAI website to check out the Pune-Satara project of the NHAI-Reliance Infra PPP on the construction, operations and maintenance of the deadly highway, which has flouted all norms of traffic safety, commuter safety and traffic engineering. While the agreement copy has been put up, we are looking forward to details of toll collection, accident statistics and constant updates. Let us give them a few weeks for adherence to the notification by the ministry.


You may also want to read...

Pune ad professional’s death in Neera River reveal secrets of NHAI work contracts


Guidelines of information to be disclosed under Sec 4 of RTI


Act for PPP




Government of India

Ministry of Personnel, Public Grievances & Pensions

Department of Personnel & Training




Subject: Implementation of suo motu disclosure under Section 4 of RTI Act, 2005 –


1. Issue of Section 4(1)(b) of the RTI Act lays down the information which should be disclosed by Public Authorities on a suo motu or proactive basis. Section 4(2) and Section 4(3) prescribe the method of dissemination of this information. The purpose of suo motu disclosures under Section 4 is to place large amount of information in public domain on a proactive basis to make the functioning of the Public Authorities more transparent and also to reduce the need for filing individual RTI applications.


2. Since the promulgation of the Act in 2005, large amount of information relating to functioning of the government is being put in public domain. However, the quality and quantity of proactive disclosure is not up to the desired level. It was felt that the weak implementation of the Section 4 of the RTI Act is partly due to the fact that certain provisions of this Section have not been fully detailed and, in case of certain other provisions there is need for laying down detailed guidelines. Further there is need to set up a compliance mechanism to ensure that requirements under section 4 of the RTI Act are


3. In order to address the above, Government of India constituted a Task Force on suo motu disclosure under the RTI Act, 2005 in May 2011 which included representatives of civil society organizations active in the field of Right to Information, for strengthening compliance with provisions for suo motu or proactive disclosure as given in Section 4 of the RTI Act, 2005. Based on the report of the Task Force, the Government have decided to issue guidelines for suo motu disclosure under section 4 of the RTI Act.

1.2 Public Private Partnerships  

1.2.1 If Public services are proposed to be provided through a Public Private partnership (PPP), all information relating to the PPPs must be disclosed in the public domain by the Public Authority entering into the PPP contract/concession agreement. This may include details of the Special Purpose Vehicle (SPV), if any set up, detailed project reports, concession agreements, operation and maintenance manuals and other documents generated as part of the implementation of the PPP project. The documents under the ambit of the exemption from disclosure of information under section 8(1)(d) and 8(1)(j) of the RTI Act would not be disclosed suo motu. Further, information about fees, tolls, or other kinds of revenue that may be collected under authorization from the Government, information in respect of outputs and outcomes, process of selection of the private sector party may also be proactively disclosed. All payments made under the PPP project may also be disclosed in a periodic manner along with the purpose of making such payment.


(Vinita Deshmukh is the consulting editor of Moneylife, an RTI activist and convener of the Pune Metro Jagruti Abhiyaan. She is the recipient of prestigious awards like the Statesman Award for Rural Reporting which she won twice in 1998 and 2005 and the Chameli Devi Jain award for outstanding media person for her investigation series on Dow Chemicals. She co-authored the book “To The Last Bullet - The Inspiring Story of A Braveheart - Ashok Kamte” with Vinita Kamte and is the author of “The Mighty Fall”.)




Nagesh Kini

3 years ago

Vinita - please provide Mr. Venkatesh Nayak's email/phone contact.

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