The Military Lending Act will take effect starting Oct. 1. Supporters say the act provides protection from financial threats to soldiers' families by barring predatory lenders from gouging military families with payday loans that trap borrowers in debt.
The law caps interest at 36 percent for certain payday, auto title and refund anticipation loans made to military families.
"The Military Lending Act takes us a step forward in getting predatory lending back under control," said Lauren Saunders, managing attorney for the National Consumer Law Center, in a statement. "We only wish it applied to other credit that can be abusive, such as credit cards and bounce loans."
The Pentagon reported that predatory practices weaken the military, which led lawmakers to pass the Military Lending Act in September last year. Officials say that debt issues threaten the security clearances of military personnel.
"Predatory lenders are blatantly targeting our military personnel, undermining their financial stability and tarnishing their service records," said Sen. Elizabeth Dole, R-N.C., at the hearing. "This practice not only creates financial problems for individual soldiers and their families, but it also weakens our military's operational readiness."