Summary of Consumer Recommendations
for Military Lending Act (MLA) Regulations
1. All high cost lending should be covered no matter who offers it, including these current products:
350% bank internet payday loans
391% bank-funded installment loans
57% to 1,100% bank holiday, pay stub and refund anticipation loan
120% to 500% bank payday “account advances”
877% “overdraft” fees for authorized ATM and debit card withdrawals
2. The regulations could provide a “safety zone” to simplify compliance for legitimate lower cost lending
Credit cards and other “open-end credit” up to 18% APR plus fees, as long as the creditor gives the Service member a refund upon request if the fees (with some exceptions) plus interest exceed 3% per month
Open-end credit up to 24% with no fees
Closed-end credit up to 24% or less, including most fees
=> This “safety zone” encompasses most traditional credit union and bank lending.
3. Safety zone credit could be exempt from:
Penalties for occasionally and inadvertently exceeding the 36% cap
Need to identify Service member customers
Dual TILA and MLA disclosures
Oral disclosures
Prohibition on waiver of rights other than MLA or SCRA
Limitations on refinancing, consolidation, rollovers, renewals.
Prohibition on auto-title lending
Prohibition against prepayment penalties
4. Safety zone credit should comply with minimal rules that would not burden mainstream lenders:
Cannot use a post-dated check as security
Cannot require allotments (direct payment by DOD, not through bank)
Must comply with Electronic Funds Transfer Act (including for single payment
transactions)
Cannot impose mandatory arbitration clause or waiver of MLA or SCRA rights on Service members
5. Recommendations for Specific MLA Provisions
Reasonable phase-in period
For first year, and for preexisting accounts, Service members must identify themselves and ask for MLA protections
After first year, lenders must comply with MLA without requiring Service members to “opt in”
No need to identify military customers for credit under 36% that complies with simple rules.
Current identification and databases are available for identifying Service members and dependents.
The 36% cap on interest should include all fees and charges (aside from tolerances for some fees for lower cost safety zone lending)
High cost lenders can make simple disclosures:
Your APR, excluding some fees, is _______%
Your APRI, including all fees, is ________%
Oral disclosures only for high-cost loans arranged orally
Prohibition on mandatory allotments only prohibits lenders from requiring DOD to pay them directly (without the money even passing through the Service member’s bank account)
Prohibition on requiring access to members’ financial account as security
Merely closes loopholes in Electronic Funds Transfer Act and extends existing protections to single payment transactions and remotely created checks.
Refinancing, consolidation only prohibited for high cost loans that increase member’s costs, not beneficial refinancing.
General arbitration clauses can specify they do not apply to military.
