Pentagon Makes ABA-Urged Fix to Military Lending Act Interpretive Rule

The Defense Department today said it is withdrawing a provision in its interpretive rule to the Military Lending Act regulations related to vehicle loans that finance Guaranteed Auto Protection and insurance credit. The move comes after the American Bankers Association had formally requested that DoD withdraw the provision two years ago.

In December 2017, the Pentagon amended its earlier MLA interpretive rule to provide that vehicle loans are not exempt if they finance “any credit-related product or service” such as Guaranteed Auto Protection, or GAP. The interpretation was inconsistent with the statute and the regulation and created uncertainty, confusion, compliance burdens and substantial potential liability for banks, ABA said.

Effective Feb. 28, the DoD is amending the interpretive rule by withdrawing the existing Q&A 2 and reverting to the prior Q&A 2, which would interpret loans used to purchase vehicles securing the loan as exempt even if they are used to purchase GAP and other products. ABA is reviewing the interpretive rule and will provide a staff analysis. For more information, contact ABA’s Nessa Feddis.