![]() ![]() The new rules also included a safe harbor provision that requires creditors to verify that an individual is a covered borrower through one or both of the following mechanisms (1) electronically through the Defense Manpower Data Center (DMDC) MLA database, and/or (2) a report from a nationwide consumer reporting agency. Whereas the rules previously defined a narrow set of products, the new rules applied to a broader range of closed-end credit products and also extended regulations to open-end products (e.g., credit cards), thereby affecting a larger number of businesses offering these products. In September 2014, DOD published a proposal to amend its MLA regulation, and on July 22, 2015, published its final rules implementing the MLA. 2016 MLA RulesĭOD's 2014 study found that the limited definition of consumer credit in the 2007 rules allowed for marketplace adaptations that weakened the intended protections for servicemembers and their families. The c onference r eport accompanying the bill directed DOD to conduct a study to determine if changes to the 2007 rules were necessary DOD's report was released in April 2014. Section 661 of the FY2013 NDAA also required DOD to conduct regular reviews of the regulations. The MLA was subsequently amended by Congress in Sections 661-663 of the NDAA for FY 2013. This amendment included a civil liability provision that would permit a covered borrower to recover damages from any creditor violating a requirement of the MLA and authorized the agencies specified in the Truth in Lending Act (TILA), as amended, to enforce those requirements. During Senate hearings in 2013, witnesses stated that better MLA rules and enforcement were needed because lenders were finding ways to structure loans to circumvent consumer protections. As these regulations were implemented, consumer advocacy groups argued that the narrow definition of consumer credit products did not provide adequate protections for military servicemembers. The MLA regulations went into effect on October 1, 2007, and covered a limited range of closed-end credit products (e.g., payday, auto-title, and tax refund anticipation loans). The law gave DOD authority to determine the scope of the law as it applied to various credit products. Under this law creditors may not exceed an annual percentage rate (APR) of 36% interest on consumer credit, and must provide specific disclosures about loan rates (e.g., statement of the APR and clear description of payment obligations). The MLA prescribes limitations on terms for consumer credit extended to covered servicemembers and dependents and bans certain lending practices. These are defined by Congress as "an unfair or abusive loan or credit sale transaction or collection practice" they were characterized by DOD in a 2006 congressionally mandated study as the use of affinity or deceptive marketing techniques to sell high-fee/interest rate, short-term, or installment loans primarily to young and inexperienced military borrowers. ![]() The impetus for the law was a perceived need to protect military personnel from certain predatory lending practices. ![]() The MLA was enacted by the National Defense Authorization Act (NDAA) for Fiscal Year (FY) 2007. Others have argued that these rules provide important servicemember protections from abusive financial practices and, in turn, have a positive impact on military readiness. Some have argued that Military Lending Act rules place undue regulatory burdens on businesses that provide credit products. T he Department of Defense (DOD) implements the provisions of this a ct and the Consumer Financ ial Protection Bureau (CFPB) oversees and enforces consumer protection laws and regulations. §987 ) regulates commercial lending practices and products offered to military servicemembers and their dependents. The Military Lending Act (MLA, 10 U.S.C. ![]()
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