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DoD issues final Military Lending Act rule

Mon, Aug 3, 2015

Washington, District Of Columbia

The Department of Defense published the final Military Lending Act (MLA) rule [80 FR 43559]. The rule applies the protections of the Military Lending Act to all forms of payday loans, vehicle title loans, refund anticipation loans, deposit advance loans, installment loans, unsecured open-end lines of credit, and credit cards. The implementing regulation provides several significant protections extended to active duty service members and their families, including:

  • A 36 percent Military Annual Percentage Rate (MAPR) limit. This cap covers all interest and fees associated with the loan. The limit now includes charges for most ancillary "add-on" products such as credit default insurance and debt suspension plans.
  • The MLA prohibits creditors from requiring service members to: submit to mandatory arbitration and onerous legal notice requirements; waive their rights under the Servicemembers' Civil Relief Act; provide a payroll allotment as a condition of obtaining credit (other than from relief societies); be able to refinance a payday loan; or be able to secure credit using a post-dated check, access to a bank account (other than at an interest rate of less than 36 percent MAPR), or a car title (other than with a bank, savings association or credit union).
  • The changes to definitions of credit in the final rule bring any closed or open-end loan within the scope of the regulation, except for loans secured by real estate or a purchase-money loan, including a loan to finance the purchase of a vehicle.

The final rule will be effective beginning October 1, 2015, with staggered compliance dates beginning October 3, 2016.