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ICBA Applauds DoD Steps Against Predatory Practices in Proposed Rule For Loans to the Military

Asks for Exemption for Regulated Depository Institutions

Washington, D.C. (June 11, 2007)—The Independent Community Bankers of America (ICBA) applauded the Department of Defense for avoiding an overly-broad definition of consumer credit in a proposed rule by focusing on predatory practices without severely restricting access to credit. The proposed regulation, required by the John Warner Defense Authorization Act for 2007, places restrictions on consumer loans for service members and their dependents. In a letter to the DoD, ICBA also asked for an exemption for closely-regulated, highly-supervised depository institutions such as community banks.

"Community banks are regularly examined by their federal supervisors and the banks take appropriate steps to make sure that the many laws and regulations that protect all consumers are carefully followed," said Karen Thomas, ICBA executive vice president for government relations. "That's why consumers are well-served by the nation's community banks. ICBA strongly urges the final rule to focus on lenders whose activities gave rise to the concerns identified in the Defense Department's report to Congress, and rely on the federal banking agencies to ensure community banks continue to follow existing laws. An exemption would help accomplish this goal."

ICBA had previously expressed concerns that a broad application of the statute would prevent men and women in uniform from enjoying many of the beneficial financial products and services available to most consumers. Focusing the proposal on short-term, closed-end credit, such as payday loans, vehicle-title loans, refund anticipation loans, and other loans that can trap service members in spiraling cycles of debt or that have high fees and interest is the proper course.

"In its proposal, the Department of Defense took an important step to avoid unintended consequences that could have unduly restricted credit for men and women in uniform," said Thomas. "By adopting a narrow definition of consumer credit the proposal targets predatory practices, while allowing community banks to continue to develop and provide affordable small-dollar loans at reasonable prices."

Read ICBA's letter at www.icba.org.