President Signs Bill Enhancing Enforcement of the Military Lending Act

Posted on January 4th, 2013 in Consumer Finance, Federal Issues By BuckleySandler

On January 2, President Obama signed H.R. 4310, the National Defense Authorization Act (NDAA) for Fiscal Year 2013, which includes provisions that enhance federal enforcement of the Military Lending Act (MLA). The MLA (i) caps the annual interest on certain loans to servicemembers at 36 percent, (ii) prohibits such loans from being secured with a personal check, debit authorization, car title, or wage allotment, and (iii) includes other servicemember protections related to the offering of consumer credit. The MLA generally covers short-term, small dollar loans, including payday, car title, and refund anticipation loans, but, pursuant to DOD regulations, excludes credit cards, overdraft loans, military installment loans, and all forms of open-end credit. By amending the MLA to state that the same regulators that enforce the Truth in Lending Act now have administrative authority to enforce consumer credit protections for servicemembers and their dependents under the MLA, the NDAA (Secs. 661-663) makes clear that the CFPB has enforcement authority under the MLA. Further, the bill gives the CFPB an opportunity to influence implementation of the MLA regulations, including their scope, by adding the CFPB to the list of agencies with which the DOD must consult regarding implementation of the MLA’s protections, and by requiring that such consultation occur at least every two years. These changes add new force to the MLA and provide additional legislative support for the CFPB and DOD to collaborate on servicemember protection issues. The CFPB and DOD already have collaborated on issues related to, for example, fraud protection and student lending. The bill also adds a civil liability section to the MLA, which permits private actions to obtain actual damages (but not less than $500 per violation), as well as punitive damages. Finally, the bill simplifies the definition of dependents protected under the MLA.

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