Association of Military Banks of America

Department of Defense Issues Final Military Lending Act Rule

Posted in Defense.gov today, 21 July 2015

After nearly three years of study, the Department of Defense today issued the final Military Lending Act (MLA) rule.

The MLA better protects our service men and women from predatory credit practices by expanding financial protections provided to service members, and helping ensure military families receive the consumer protections they deserve. These actions build on the president’s announcement during a speech at the Pittsburgh chapter of the VFW of a voluntary partnership with financial lenders across the country to help deliver important financial and home loan-related protections to our military community.

“With this action, the department takes an important stand against companies that can prey on our men and women in uniform. This new rule addresses a range of credit products that previously escaped the scope of the regulation, compromising the financial readiness of our troops. Today, with our regulatory and enforcement partners, we stand united in support of our service members and their families,” said Deputy Secretary of Defense Bob Work.

This 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 Annual Percentage Rate limit. This cap, which is referred to as the Military Annual Percentage Rate or MAPR, covers all interest and fees associated with the loan. This 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 service members’ 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.

Read full article on Defense.gov

Other resources:

Federal Registry final rule

White House Fact Sheet