By J. Lyn Carl, GalleryWatch.com
Austin, TX –
"Companies that would prey on soldiers are abhorrent," said Sen. Eliot Shapleigh (D-El Paso) as he today explained his SB 506 and SB 1479, relating to predatory insurance practices involving members of the military.
SB 506, which was passed in the Senate last week, relates to the sale of life insurance to military personnel, and SB 1479 relates to deferred presentment transactions of certain military personnel or their spouses.
Shapleigh said unscrupulous and predatory insurance companies take advantage of young and inexperienced soldiers who buy high-priced insurance when they could get a much cheaper rate through the federal government. He said SB 506 will cause insurers who are marketing to young soldiers to disclose that they have a United States government product that can be purchased at a much lower cost.
SB 1479, said Shapleigh, deals with payday lenders. He explained that under current payday rates, "if a soldier on Day One borrows $1,000, on Day 365, they pay back $4,000."
He said this legislation causes disclosures "up front." He said if a military commander has an off-limits order, the lender must disclose that. It also prevents garnishment of wages and applies to both active duty military and members of the National Guard.
Saying Shepherd Air Force Base in his district has one of the biggest problems in these areas, Sen. Craig Estes (R-Wichita Falls), praised Shapleigh for his legislation saying, "It is good for military communities and good for the military."
Shapleigh said a study that led to his filing the legislation showed Texas military bases ranked high regarding prevalence of predatory lenders. "Anywhere there's a military base, there are predatory lenders at the gates," he said. Shapleigh noted that military bases in San Antonio were successfully dealing with this problem because of enforcement of off-limits orders. He said San Antonio officials work hard to ensure those lenders are not near the bases. He described the off-limits order as a "highly successful tool" and said its implementation would also likely be successful if it were used at the state's other 17 military installations.
The El Paso Democrat said the legislation allows for looking at the type of lender, the track record of the lender, any abusive practices of the lender and the collection practices.
He said any business that offers $100,000 for $100 per month when the federal government offers $200,000 for less than $17 per month, it shows those businesses are willing "to prey on soldiers while they are fighting for the very freedom of that company."
Military personnel are particularly susceptible to this type of transaction because they have a steady paycheck, said Shapleigh. He noted that having bad credit while in the military is a "significant" issue that that sometimes base commanders are used by these companies to help collect that debt.
He said if the member of the military cannot pay back the debt in 30 days, interest is added to the loan, it is flipped and "increases dramatically what's due."
Shapleigh pointed out that while the Texas Constitution prohibits the garnishment of wages unless it is voluntary, some lenders will arrange with a commanding offer for a military debtor's pay to be deducted and handed to the lender. He said his legislation stops this, even though it is already unconstitutional.