As a current member of the S.C. House Labor, Commerce and Industry Committee and someone who has worked for many years in the lending industry, I understand how important emergency family loans can be. I also know there is a big difference between reputable traditional installment loans and other unsavory lending practices, like payday loans.
Unfortunately, those smaller traditional installment loans (around $3,000 or less) are currently a target in Congress. And, in most cases, many of these loans are the first choice of our young military service members and their families.
Regrettably, the Department of Defense recently proposed tough new regulations that amend the Military Lending Act to cover a far broader range of consumer financial services, including credit cards, unsecured lines of credit and installment loans. The unintended consequences of this expansion could mean that reputable money lenders will have to severely restrict -- if not altogether eliminate -- access, to safe, affordable credit options for military personnel and their families.
New regulations would require institutions to have a new rate cap on installment loans and force them to run all applications through a government database just to determine if the borrower has a military affiliation. As a result, many lenders will cease to offer loans to members of the military altogether.
This issue has moved from the DoD to Congress, where the House Armed Services Committee voted narrowly to strip out language that would have delayed implementing the new regulations inside the FY 2016 National Defense Authorization Act. Instead of taking time to study these concerns, Congress has decided it was willing to move ahead.
These fine men and women of the military deserve better than that. We need Congress to seriously look again at these regulations. Our soldiers put everything on the line to protect our country in times of national emergency. ... It is only right they are afforded the right to protect themselves and their families in the case of a financial emergency.
Installment loans are fixed-rate, fully amortizing small-dollar loans that are repaid in equal monthly payments, offering a quick and affordable way to provide for a family in a time of emergency. In contrast to payday loans, installment loans offer transparent, easy-to-understand terms, due dates and payment amounts, without balloon payment structures.
Instead of protecting military personnel from being trapped in a cycle of debt, the actions of the U.S. House have instead restricted our soldiers' ability to gain access to installment loans and other forms of safe and affordable credit.
Installment loans are also distributed by reputable companies who evaluate the borrower's ability to repay the loan prior to approval. They check the borrower's income, expenses and credit history to determine eligibility. These lenders also report payment behavior to credit bureaus, which offer military personnel the opportunity to strengthen their credit history.
A typical installment loan around $1,500 allows a family to finance necessities of their everyday lives, such as a car repair, replacing household appliances such as a washing machine or water heater, or to cope with an unexpected medical expense.
These young leaders must have the same ability to cope with family emergencies like all other Americans. However, if the Pentagon's proposal moves forward unchecked, Congress would limit access to one of the fastest, most affordable ways for young military families to deal with these financial emergencies.
The Senate Armed Services Committee will soon have the opportunity to act on this issue when it takes up the FY 2016 NDAA. The committee can -- and should -- use this bill as a vehicle to delay implementation of the DoD's rule until these problems are fixed. It is my hope that committee leaders like Sen. Lindsey Graham will stand up, once again, to defend our military in this matter.
Our troops deserve to have the ability to borrow safely to meet their obligations.
Rep. Nathan Ballentine is a Republican from Chapin, near Columbia.