Military "Payday" Lending


Provision of consumer credit products to members of the armed services and their spouses and dependents.

Position Statement

ABA supports efforts to protect the men and women of our armed forces from predatory financial products. Banks have long been leaders in providing valuable and innovative financial services to members of the armed forces.  Laws designed to protect service members from unscrupulous lenders should not discourage depository institutions from developing valuable and innovative loan products that meet the needs of military men and women, neither should they inhibit the ability of banks to offer to military families the full range of financial services available to customers outside of the armed forces. 


ABA supports protection for consumers against predatory lending practices, particularly with respect to military families, through national lending standards that curb abuses while maintaining access to affordable credit products. 

Nearly all banks have armed services members and families among their customers.  Many of ABA's members serve military communities and offer valuable financial products on competitive terms.  Our members are proud of the service that they provide to the members of our nation's military.

In August 2006, the Department of Defense (DoD) report to Congress on Predatory Lending Practices Directed at Members of the Armed Forces and Their Dependents concluded that predatory loans, most notably payday loans, were undermining military readiness.  As a result, Congress enacted Section 670 of the John Warner National Defense Act for Fiscal Year 2007 (P.L. 109-364) in order to prevent unregulated payday lenders from using predatory loan products to take advantage of military personnel.  This statute regulates the terms of consumer credit that lenders may extend to active duty service members, their spouses, and dependents.

In August 2007, DoD issued a regulation to implement this new law.  Its scope is appropriately focused on payday loans, vehicle title loans, and refund anticipation loans, the abusive products highlighted in the 2006 study. The DoD regulation sought to ensure that abusive practices of certain unregulated lenders would be stopped without harming military families or the ability of banks and savings associations to continue to serve them with a full range of financial products. ABA supports the focused application of the military lending rule and would oppose any effort to expand the regulation to include mainstream products and services that are provided by regulated financial institutions.

Bankers, policymakers, and regulators are in the process of learning more about the small-dollar credit market. In February 2008, the FDIC launched a two-year, small-dollar loan pilot program, and federal banking regulators have indicated that such loans may receive favorable consideration for purposes of complying with the Community Reinvestment Act. Additional information on this two year pilot program can be found in the More Resources page that follows, under Resources and Links. ABA will continue to monitor the implementation of the military lending rule to ensure that banks and savings associations are not unintentionally discouraged from providing to military personnel and their families the complete menu of financial services that banks and savings associations can offer to the general public.

Resources and Links