Preying on the military, with politicians' help

By Phil Mattera, Dirt Diggers Digest

Reincorporating in foreign countries with lower tax rates is not the only way large corporations put profit before patriotism. A front-page story in the New York Times points out that predatory lenders continue to target members of the U.S. military. Despite much business talk about supporting the troops, these unscrupulous firms exploit the precarious financial condition of many members of the armed services.

The vulnerability of service members to predatory lending is not a new story. The federal Military Lending Act of 2007 was passed with the intention of barring the most exploitative practices, but it did not go far enough. The Obama Administration is now seeking sweeping changes to the law to eliminate its many loopholes and to expand its applicability to the many new kinds of predatory "services" that the infinitely creative consumer finance industry has created in the past seven years.

At the same time, the Consumer Financial Protection Bureau has brought enforcement actions against predators that have been violating the law. Last year the bureau got payday lender Cash America to pay $19 million to settle charges relating to abusive practices such as charging more than the 36 percent interest cap established by the Military Lending Act. In May, Sallie Mae and its former loan servicing unit Navient had to pay $60 million to settle federal allegations that they charged servicemembers excessive interest rates and fees on student loans. And in July, a company called Rome Finance had to pay $92 million to settle accusations that it exploited military purchasers of consumer electronics. CFPB Director Richard Cordray told reporters at the time: "Rome Finance's business model was built on fleecing servicemembers."

Faced with these obstacles, the predatory lenders have been looking for relief at the state level. The Times points out that states such as Kentucky, Arizona, Missouri, Indiana and Florida have eased their financial regulation, but it gives special attention to North Carolina, where a 2011 push by financial services lobbyists to ease interest rate restrictions was so brazen that it prompted military commanders from Fort Bragg and Camp Lejeune to warn the changes could harm their troops. Last year the industry tried again and succeeded, thanks in part to a decision by the commanders not to get involved again.

The issue is playing a role in this year's U.S. Senate race in the Tarheel State. Republican candidate Thom Tillis, the state Speaker, supported the easing of restrictions on military lending and has reaped large campaign contributions from the financial services industry. The Times asked his campaign manager Jordan Shaw about this and was told that that the donations did not influence his voting record. Yet Shaw stated that Tillis "wanted to make sure that people still have these loans as an option."

Conservative politicians such as Tillis have bought into the self-serving ideology of predatory lenders -- that consumers should have the freedom to choose exploitative borrowing arrangements. It's bad enough when this mindset is applied to the general public. Extending it to those who risk their life for their country is breathtakingly cynical and a reminder that corporations are loyal to nothing other than their own enrichment.