The Obama administration is proposing sweeping changes to a seven-year-old federal law that was intended to shield service members and their families from high-cost loans tied to their paychecks, a move that reflects the Defense Department’s growing recognition that lenders have exploited loopholes in the law.

Those loopholes in the Military Lending Act have left hundreds of thousands of service members across the country vulnerable to potentially predatory loans, including high-cost credit from retailers to buy electronics, payday-style loans and loans tied to car titles.

The proposed updates to the law would extend a 36 percent interest rate cap on short-term loans to cover a much broader swath of products — from installment loans to credit cards — that have proliferated since the law was passed by Congress.

Those additional protections are aimed at loans like the kind that haunted Petty Officer First Class Vernaye Kelly, who received her first payday-style loan when her husband, a staff sergeant in the Marines, was deployed in Iraq. Since then, Ms. Kelly, 30, has taken out other loans, none covered by the current act’s protections, that left her scrambling to make ends meet.

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