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America's defenders still denied access to alternative credit

Sep 30, 2013 Sean Albert

The Great Recession took its toll on many people across the United States with little regard for gender, education, job and plenty of other demographics. In the end, only the ultra rich got away scot-free. The financial crisis adversely affected so numerous areas of the economy, from the unemployment rate to inflation, and banks and traditional credit companies turned away those in need left and right.

This was where alternative finance companies came in handy. Individuals went to these businesses' storefronts and websites to take out short term loans, which allowed many to keep roofs over their head, cars in their driveways and food on the table. These services were invaluable to many people when the fiscal future seemed bleak.

One of the best things about these companies? Individuals with less than stellar consumer credit scores - a situation that was exceedingly common during the recession - could still have access to credit. That's because many of these businesses look at alternative credit scores, like the Payment Reporting Builds Credit model, which takes an individual's pr​oclivity to make utilities payments on time into account, among other factors.

However, one important group that had to make do with what they had and go it alone without help from short term lenders during these tumultuous few years was composed of members of the armed forces and their families. According to U.S. law, these people cannot borrow from small-dollar lenders. As such, many suffered greatly, despite being some of the most revered individuals in the nation.

This situation still rings true today, as many consumer organizations continue to warn lenders about marketing to and helping out soldiers being forced into financial ruin.

Better Business Bureau issues statement to Texas soldiers
According to the Killeen Daily Herald, because some desperate members of the military are trying to tap into alternative credit wherever they can, the Better Business Bureau (BBB) was forced to issue a statement to individuals based out of Texas's Fort Hood, reminding them that they cannot take out short term loans.

BBB representative Helen Moore told the news source that the organization was notified of soldiers seeking out these options. She also highlighted the relatively high annual interest rates, but failed to mention that the numbers seem so large because the actual borrowing term isn't meant to be more than a few weeks at most.

Moore also told the news outlet that sold​iers are using loopholes in the Military Lending Act of 2006 because they desperately need funding.

What should the lenders do?
This is a tricky area for short term lenders. While legitimate businesses always follow and respect the law, it makes sense to want to help consumers in need wherever possible, especially if these loopholes make it technically legal for some sold​iers to take out loans. It might be best for employees to brush up on federal, state and local statutes to make sure that they always stay on the right side of the law. Otherwise, they could risk getting their licenses revoked, which may cause their companies to close their doors or face stiff penalties.

For instance, reported that the Military Lending Act not only forbids extending short term loans to servicemen, but also includes car title loans, among other types of alternative funding. This means that companies of all kinds in this sector need to carefully vet potential borrowers' information before approving applications.

Investing in the best ID verification tools would be a good way to accomplish this. The technology, commonly used to make sure borrowers aren't using false or stolen identities, would be a quick way to make sure an individual attempting to take out a loan is not a servicemember.