Guidance on Military Lending Act

mlaOn August 26, 2016, the Department of Defense issued an Interpretive Rule to help clarify questions regarding the amended Military Lending Act (MLA). The amended rules take effect on October 3, 2016 – just three short weeks away! The MLA, as implemented by the Department, limits the military annual percentage rate (MAPR) that a creditor may charge to a maximum of 36 percent, requires certain disclosures and provides other substantive consumer protections on “consumer credit” extended to Service members and their families.

The Interpretive Rule provides clarification in the form of a Q & A regarding the following topics:

  • If hybrid purchase money loans fall within the exception to “consumer credit” under the rule
  • The timing of fee waivers/reductions when fees cause the MAPR to exceed 36 percent
  • If assignees receive the same safe harbor protections as the initial creditor
  • How to perform periodic post-closing screening of covered borrowers for open-end credit and not violate the historic lookback prohibition
  • How to meet the requirement to provide disclosures orally
  • If a single credit agreement may be used for loans covered and not covered by the MLA
  • If a creditor may accept a check or set up an auto debit for loans subject to the MLA (and what is still prohibited)
  • Whether a creditor may accept deposit accounts as collateral for loans to a covered borrower
  • If right of offset can be applied to a loan subject to the MLA
  • Other details affecting credit card products

To review the Interpretive Rule, click here.

REMINDER – ALL banks are subject to this amended rule! Are you ready??

If the rules have your head spinning and you still aren’t sure if your bank will be subject to the amended MLA rules, we want to remind you of the two part MLA webinar series available from the IBA. Part 1 covers what loans were covered, the definition of a covered borrower, safe harbor protections, MAPR calculations, disclosure requirements and contract prohibitions and was presented on May 18. This session was recorded and still available on-demand. Part 2 will be presented September 14 at 10 a.m. This session will provide a recap of the rule changes, a detailed review of the Interpretive Rule and an overview of the credit card rules that go into effect in 2017. Don’t miss out! Purchase Part 1 and register for Part 2 today by clicking here!

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