Members of the military — particularly younger members from lower-income backgrounds — are too often the target of shady, predatory businesses looking to take advantage of their youth and inexperience with finances. The Military Lending Act offers some protections, but these operators find ways to get around the law. On Friday, the U.S. Dept. of Defense took steps to eliminate some of those exploitations by creating reforms to the current military discretionary allotment system.

According to the Department of Defense, the policy changes [PDF] will prohibit servicemembers from using new allotments to purchase, lease or rent personal property, including vehicles, appliances and consumers electronics, effective January 1, 2015.

Currently, the military discretionary allotment system allows servicemembers to automatically direct a portion of their paycheck to financial institutions or people of their choosing. But often military personnel using the allotment system instead of other automatic payment options end up losing out on certain legal protections.

Existing allotments and those made for the purpose of savings, insurance premiums, mortgage or rent payments, support for dependents, or investments will not be affected. The changes do not apply to military retirees or Department of Defense civilian employees.

The new regulations are intended to eliminate the aspect of the allotment system most prone to abuse by unscrupulous lenders that prey on servicemembers.

Consumerist reported on one such company earlier this year, when the Consumer Financial Protection Bureau took action to stop USA Discounters from taking advantage of underpaid soldiers by charging exorbitant fees, suing them when they feel behind on payments and skirting the Servicemembers Civil Relief Act (SCRA), which gives active duty servicemembers the right to defend themselves but does not specify where lawsuits must be filed.

The retailer, which has locations near 11 military bases, advertised its always-approved credit offers to members of the military with bad credit or no credit history as a way to entice them to purchase items such as computers and televisions.

Officials with the Department of Defense say the new rules will significantly improve protections for all servicemembers and their families, while not significantly reducing the flexibility to use allotments for a number of legitimate purposes.

The changes were directed by Secretary of Defense Chuck Hagel following an interagency review conducted in response to major enforcement by the CFPB, the Dept. of Defense says in a new release.

Officials with the CFPB called the reforms a “critical new protection” for military personnel.

“In recent years, the allotment system has been used by unscrupulous companies that prey on servicemembers as a quick and secure way to get paid. Many of them have even required payment by allotment,” explains Holly Petraeus, CFPB director for servicemember affairs. “Today’s announcement will help prevent future abuses by addressing the problem at its source.”

Since its creation after the recession, the CFPB has recovered more than $98 million for thousands of consumers through multiple enforcement actions against entities whose businesses were largely premised on receiving payments from servicemembers, often through the military allotment system.

Earlier this week, the CFPB issued a reminder to service veterans of their rights to have some of their student debt forgiven, but warned that if they pursue the option they must be vigilant in checking their credit reports for inaccurate information.

Under federal law, veterans can seek federal student loan forgiveness if they receive a 100-percent disability rating by the Department of Veterans Affairs, the CFPB reported.

“We are concerned that, in some circumstances, when veterans are able to discharge their student loans due to their disability, they may experience damage to their credit report if their student loan servicer provides incorrect information to the credit bureaus,” the blog post warned. “These mistakes, if uncorrected, can result in a negative entry on their credit report that makes it harder and more expensive for these disabled veterans to get credit, buy a car or take out a mortgage.”

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