ABA Calls for Changes to MLA Interpretive Rule Amendments

In a comment letter to the Department of Defense today, ABA called on the Pentagon to repeal a section of the amendments to its Military Lending Act interpretive rule relating to service members’ ability to finance the purchase of Guaranteed Acceptance Protection insurance with a loan used to purchase the vehicle.

Under the MLA statute and regulation, purchase money loans, such as car loans, are exempt if they are used for the express purpose of financing the purchase of the property securing the credit. The MLA’s recent interpretive rule, however, provides that the exemption does not apply if the loan also finances credit insurance such as guaranteed asset protection, known as GAP. As a covered loan, such loans would be subject to the prohibition in the regulation that prevents non-depository institutions from using a title to a vehicle as security for covered loans.

ABA noted that this interpretation will restrict servicemembers’ ability to obtain GAP insurance, which could cause financial hardship for men in women in uniform and their families. The association added that because the amendments to the interpretive rule appear to be retroactive, this interpretation could affect vehicle loans made since the MLA’s effective date of Oct. 3, 2016. For more information, contact ABA’s Nessa Feddis.


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