Trade Groups Call for Further Clarification to MLA Rules

The American Bankers Association and six other financial trade groups wrote to the Department of Defense on Friday urging the department to take additional steps to clarify inconsistencies and confusion that still surround the amended Military Lending Act rules and a subsequent interpretive rule issued by DOD. They added that changes are necessary to ensure military personnel and their families have access to safe and responsible credit products.

The groups encouraged DOD to issue an interim final rule that would address lingering problems with the rule, and provided detailed comments and suggested regulatory language. They added that the rule was never intended to apply to mainstream loans, but rather, to payday loans, title loans and tax refund anticipation loans.

Among the recommended changes were clarification that the exemption for purchase money loans includes loans that are used not only to purchase the item securing the loan but also to purchase related items, such as extended warranties on a car. In addition, the associations recommended exempting credit cards from the rule, noting the requirements are unworkable; for example, it is not possible to discern which fees are “bona fide” and thus excludable from the military annual percentage rate. The group also asked DOD to extend the mandatory compliance date for credit cards to allow time for changes in the regulation.

Since adoption of the rule in July 2015, ABA has hosted numerous meetings with DOD, banks, and trade associations on the MLA rules. The association has also created a dedicated resource page on aba.com for the MLA to help bankers comply. For more information, contact ABA’s Nessa Feddis.