A group of Democratic House members, joined by a Republican House member, has reintroduced a bill (H.R. 5974) that would make consumer credit extended to any consumer subject to the Military Lending Act’s “all-in” 36% rate cap.
The bill provides that 10 U.S.C. Sec. 987(b) applies “to a creditor who extends consumer credit to a consumer to the same extent as such section applies to a creditor who extends credit to a covered member or a dependent of a covered member.” (emphasis added) Sec. 987(b) establishes the 36% cap.
The MLA provides that the 36% cap does not apply to:
- Residential mortgages
- A loan to purchase a motor vehicle when the loan is secured by the motor vehicle purchased
- A loan to buy personal property when the loan is secured by the property purchased
In addition, the Department of Defense regulations implementing the MLA make credit transactions that are not subject to Regulation Z generally exempt from the MLA.
The bill includes the MLA exemptions for residential mortgages and purchase money loans secured by a motor vehicle but does not expressly exempt purchase money loans secured by personal property from the cap. The bill also contains an exemption for loans made by federal credit unions subject to the NCUA usury limit. Thus, it is unclear whether the bill, in applying the MLA rate cap to consumer credit extended to any consumer “to the same extent as [the MLA rate cap] applies to a creditor who extends credit to a covered member or a dependent of a covered member,” incorporates all MLA exemptions.
While the bill could be passed by the House, it seems doubtful that it would gain any traction in the Senate where Republicans can use the filibuster to block the bill.
The bill is opposed by the American Financial Services Association and other trade groups. AFSA asserts that, contrary to the bill sponsors’ claims, the bill will actually harm consumers’ access to credit during this time of economic uncertainty.