A number of prominent industry trade groups have written to the Department of Defense (DoD) seeking clarifications to the Military Lending Act (MLA) final rule adopted in July 2015 that dramatically expanded the scope of the MLA’s coverage.  The DoD consulted with the CFPB in developing the final rule, and the CFPB actively supported the DoD’s plans to expand MLA coverage.

MLA coverage was previously limited to only three types of consumer credit extended to active-duty service members and their dependents: closed-end payday loans with a term of 91 days or less in which the amount financed does not exceed $2,000, closed-end vehicle title loans with a term of 181 days or less, and closed-end tax refund anticipation loans.  The final rule extends the MLA’s 36 percent interest cap and other restrictions to a host of additional products, including credit cards, installment loans, private student loans and federal student loans not made under Title IV of the Higher Education Act, and all types of deposit advance, refund anticipation, vehicle title, and payday loans (but residential mortgages and purchase-money personal property loans are excluded).  Although the DoD’s final rule took effect on October 1, 2015, it applies only to consumer credit transactions or accounts that are consummated or established after October 3, 2016 for most products, and after October 3, 2017 for credit cards.

In its letter to the DOD, the American Financial Services Association (AFSA) suggested clarifications to the sections of the regulations dealing with the definition of “credit-related ancillary product” (any charge for which is included in the Military Annual Percentage Rate), the methodology for identifying covered borrowers, mandatory disclosures, limitations regarding waivers and using vehicle titles as security, and the bona fide error defense.  AFSA also joined another letter to the DoD sent by a group of prominent trade associations, including the American Bankers Association, the Consumer Bankers Association, and the Financial Services Roundtable.  The joint letter suggests clarifications and modifications concerning nine topics, some of which are also addressed in AFSA’s separate letter.