Collector - September 2017 - 44

COMPLIANCE

Reminder: Expanded MLA Provisions Coming
for Credit Cards in October
Work with your clients to ensure they are complying with the MLA's requirements
when extending credit to service members.
By Andrew Pavlik

T

he Military Lending Act is
implemented by the Department
of Defense and limits the military
annual percentage rate that a creditor
may charge to a maximum of 36 percent,
requires certain disclosures by creditors
and provides other consumer protections
on "consumer credit" extended to service
members and their families. In 2015, the
DOD amended its regulation to extend
the protections of the MLA to a broader
range of closed-end and open-end credit
products.
Previously, the MLA only applied to three
narrowly defined consumer credit products:
payday loans, vehicle title loans and certain
tax refund anticipation loans.
Now, under the revised regulations,
consumer credit is defined as credit offered
or extended to a covered borrower primarily
for personal, family or household purposes,
and that is subject to a finance charge or

payable by a written agreement in more than
four installments.
The revised definition greatly expanded
the definition of consumer credit, which
now includes both closed-end and open-end
credit, including installment loans, lines of
credit, credit cards and other consumer credit
transactions. Only a few credit products are
exempt. The act and the regulations exclude
from the definition of consumer credit:
* Residential mortgages.
* Vehicle financing or leasing when the
credit is secured by the vehicle.
* Credit to finance personal property
secured by the property being
purchased.
* Credit that is an exempt transaction or
is not otherwise subject to disclosure
requirements of Regulation Z.
* Any credit for which the creditor
determines that a consumer is not a
covered borrower.

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Notably, while the final rule extended the
MLA's protections to most credit products
consummated or established after Oct. 3,
2016, the final rule provided a temporary
exemption for credit extended in a credit
card account under an open-end (not homesecured) consumer credit plan until Oct. 3,
2017.
Unless the DOD extends this exemption,
after Oct. 3, 2017, any credit extended in
a credit card account under an open-end
consumer plan that is not secured by a home
will be subject to the MLA's protections.
Although it is possible that the DOD may
extend the exemption for credit card issuers
for one more year, as of the date of this
writing no extension has been announced.

PRACTICAL CONSIDERATIONS
Debt collectors that collect credit card debts
and other obligations that are covered by
the MLA should work with clients to ensure
that clients are complying with the MLA's
requirements when extending credit to
service members.
For more information on the MLA
and the final rule, the DOD has issued
an interpretive rule on its regulations
implementing the Military Lending Act,
which provides guidance on questions the
DOD has received regarding compliance
with its final rule.
The guidance can be found here: http://
ow.ly/OZGD30dieBH. For more general
information on the MLA, ACA International
members can review ACA SearchPoint™
document #8047, Understanding the Military
Lending Act.
Andrew Pavlik formerly served as ACA
International's senior compliance analyst.

44

ACAINTERNATIONAL.ORG


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