On August 1, 2018, Sen. Bill Nelson (D-Florida) introduced S. 3334 captioned “The Military Lending Improvement Act of 2018” in the United States Senate to “expand and improve” credit protections afforded to service members by the Military Lending Act (MLA) and the Fair Debt Collection Practices Act (FDCPA). If this bill becomes law, it would lower the maximum rate of interest on covered transactions from 36 percent to 24 percent. It would also expand transactions covered by the MLA to include auto and other loans secured by personal property, extend MLA protections to recently-discharged veterans, and amend the FDCPA to prohibit debt collectors from “harassing” service members by calling their commanding officers.
In a press release, Sen. Nelson, who is a senior member of the Senate Armed Services Committee, stated that “our military men and women have dedicated their lives to serving our county and we must help ensure they do not become the targets of unscrupulous lenders.” Specifically, the bill would:
- Reduce the interest rate cap under the MLA from 36 percent to 24 percent. (The 36% cap is on the Military Annual Percentage Rate (MAPR), which is an “all-in” APR that includes interest and other fees such as application fees and annual fees that are not finance charges under Regulation Z.)
- Extend coverage of the MLA to veterans for up to one year following discharge from active duty.
- Expand coverage of the MLA to credit intended to finance the purchase of motor vehicles and other personal property.
- Amend the FDCPA to prohibit debt collectors from “communicat[ing], in connection with the collection of any debt, with the commanding officer or officer in charge of any covered member, including for the purpose of acquiring location information about the covered member.”
- Prohibit debt collectors from threatening that failure to cooperate with a debt collector will result in prosecution under the Uniform Code of Military Justice.
- Prohibit creditors from requiring installation of GPS trackers or kill switches in motor vehicles as a condition of extending credit to service members.
- Require the Department of Defense to assess whether creditors downloading bulk data from the MLA database are using adequate safeguards to prevent data breaches and other potential misuse of downloaded data.
The Military Lending and Improvement Act of 2018 was originally introduced as amendments to the National Defense Reauthorization Act of 2019 (which has already been presented to the President for signature), though no action was taken on the proposed amendments. Accordingly, Sen. Nelson reintroduced the amendments as a standalone bill, S. 3334, which has been referred to the Committee on Banking, Housing and Urban Affairs. The bill will surely be opposed by the consumer financial services industry, which has seen MLA coverage explode from furthering the statute’s original purpose — protecting service members from aggressive pay day-type loans – to placing restrictions on forms of credit not typically considered “predatory,” such as credit cards. We will provide updates on the bill as they become available.