The U.S. Department of Defense (DOD) has made great progress in its quest to safeguard service personnel’s monetary solvency. Still, predatory lenders can still take advantage of soldiers who do not employ the Military Lending Act (MLA.)
Texas-based payday and auto title businesses are known for using loopholes to avoid already-enacted protections. Because Texas has the greatest number of active duty military personnel, this is a major problem. According to the DOD, Texas is one of just 11 states that permit payday lenders to avoid the safeguards provided by the MLA. Texas Appleseed’s senior policy analyst Ann Baddour condemns this situation.
“Texas has some of the weakest laws in the U.S. to rein in abuses by payday and auto title businesses, so we commend the DOD for taking the necessary actions to protect borrowers,” she said. “We strongly encourage final adoption of the rules.”
Texas Appleseed is making its first-ever release of data it has gleaned from research into the loopholes allowing payday and auto title firms to bypass provisions of the 2007 MLA. These protections were intended to insure a 36% annual percentage rate cap for payday loans of 91 days or less, and auto title loans of 181 days or less.
During the past year Texas Appleseed toured 33 payday and auto title businesses located near three major military installations in Texas, specifically Fort Hood, Fort Bliss and Randolph Air Force Base. Information obtained from these visits indicates the DOD safeguards need strengthening.
* It is significant how payday and auto title businesses, many of which offer loans at 500% APR or higher, tend to cluster around Texas military installations.
* Texas Appleseed found five businesses (including some of the largest in Texas) offering payday or auto title loans not covered by present MLA protections. Four offer installment payday loans with terms of 160-180 days, and average APRs of 510%. One offered 12-month auto title loans at 99% APR.
* Payday businesses single out military personnel, particularly around Fort Hood, by erecting large signs reading “Military Welcome.”
Proposed strengthening of the MLA would close major loopholes to which military personnel alone are vulnerable. U.S. Census Bureau data from 2008-2012 reveals that Texas, with a veteran population of 1.6 million, is second only to California in this respect. Kileen, Texas has one of the biggest concentrations of veterans in the country.
New research from Texas Appleseed reveals that 82% of all the state’s zip codes that contain a veterans’ facility also have one or more payday or auto loan businesses. A full one quarter of all Texas zip codes include payday or auto title loan businesses. Forty-eight percent of the state’s veterans’ facilities have at least five payday and auto lending firms within the same zip code.  The research also discovered that the top three Texas cities with the largest number of payday and auto title loan businesses have the same zip codes as at least one VA facility. These are Harlingen with 21 locations, El Paso with 20 locations and San Antonio (which encompasses three zip codes) with 16 locations in one zip code, and 14 in another.
“Until we enact comprehensive reforms to the payday and auto title debt trap and foster a consumer credit market that encourages borrower success we will continue to do a disservice to our veterans, our families and the individuals who are struggling to get by,” said Baddour.
Texas Appleseed was part of a public comment period investigating the possible need for strengthening the MLA. This period was followed by a DOD report in April 2014 that documented the fact that mere financial education is insufficient to protect military personnel from predatory  lenders who employ deceptive marketing and low-quality, small-dollar loans to ensnare military families in debt cycles.
Texas Appleseed is a non-profit organization that has spent the past 16 years protecting vulnerable Texans from predatory lending institutions. Texas Appleseed strives to insure social and economic fairness for every Texan by employing volunteer lawyers and other professionals to seek out feasible solutions to difficult, systemic problems. For more information visit or
Story by Kelly Bell/ETR