DOD’s Expanded Military Lending Act Rules

09/03/2015 02:00 p.m. - 03:00 p.m. EDT

Banking + Financial Services, Financial Institutions + Financial Services, Fair Lending, Financial Services, Financial Services Litigation, and Mortgage

Angela E. Kleine and Obrea O. Poindexter

Angela E. Kleine and Obrea O. Poindexter


Caitlin Baker
(212) 336-4097

On July 22, 2015, the Department of Defense (DOD) published new rules broadening the scope of current rules implementing the Military Lending Act (MLA). The amended rules significantly expand the scope of the MLA provisions by covering both new types of creditors and new credit products. For example, the new rules will cover many more types of closed-end loans, including, among other products, installment loans. Moreover, the new rules will also cover open-end lines of credit and credit cards for the first time. There are significant risks related to noncompliance, including potential civil liability and “voiding” of credit contracts; yet there remain critical ambiguities in the rule that may make compliance a guessing game for lenders. For example, the DOD provides little clarity with respect to whether certain fees must be included in the rate cap calculation and the meaning of “onerous” and “unreasonable” notice provisions.

The new rules become effective on October 1, 2015, with compliance required by October 3, 2016 for non-credit card products and by October of 2017, or possibly 2018, for credit cards. Please join us for a discussion on the DOD’s new MLA rules. Speakers will provide an overview of the new rules, which will cover:

  • The expanded scope of coverage under the new rules, which extends the rule to previously excluded credit products, including credit cards and a broader range of non-card credit products;
  • The Military Annual Percentage Rate (MAPR) cap of 36 percent, including the calculation of the MAPR based on finance charges and additional types of fees, and the exemption for “bona fide” and “reasonable” fees for credit cards;
  • The required disclosure of information that a creditor must provide to a covered borrower when consummating a transaction involving consumer credit, including the “statement of the MAPR;”
  • The prohibitions on requiring the borrower to submit to arbitration in the case of a dispute and on charging a penalty fee if the borrower prepays all or part of the consumer credit; and
  • The DOD’s planned mechanism for a creditor to determine, via a safe harbor, whether a consumer-applicant is a covered borrower.

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