NPR: Trump Administration proposing to weaken Military Lending Act

The Military Lending Act (MLA) is aimed at protecting service members from predatory loans and unfair financial products and services. (For instance, the MLA prohibits the use of arbitration agreements in most consumer credit contracts entered into by service members and their dependents.)

But it appears that the Trump Administration wants to undermine the MLA.

At the behest of the National Automobile Dealers Association, the Trump Administration has been planning to propose that car dealers be allowed to tack on "gap insurance" when they sell cars to service members. But when sold by car dealers, that type of insurance is typically a rip off imposed on unsuspecting customers. And so, current MLA regulations prohibit the practice.

NPR reporter Chris Arnold explains:

Here's how

works: Cars lose some of their value the moment they are driven off the lot. Dealers often tell customers that if their car gets wrecked in a crash they could be financially harmed because regular insurance may not pay out the entire amount owed on the loan. [Univ. of Utah law professor Chris] Peterson says some car dealers push this insurance product really hard. "They convince people they've got to have this gap insurance," he says. That kind of insurance can actually be inexpensive. Peterson … says it often costs as little as $20 to $30 a year and is available from a car buyer's regular insurance company. "But if you buy it from your car dealer, they may mark it up. … I've seen gap insurance policies being sold for $1,500" over the course of the loan, he says.

So, the Trump Administration, it appears, wants to give service members the option of paying $1,500 for something that the market values at about $30 when customers are well-informed. 

Listen to (or read) Arnold's story here. You'll learn about other ways in which the Trump Administration may weaken the MLA.

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