Steve Roennau
Vice President
Compliance
EFG Companies
Sighs of relief turned into sighs of frustration this past December when the Department of Defense (DOD) issued a new interpretation of the Military Lending Act (MLA), potentially resulting in severe implications for all dealers who sell or have sold vehicles to active duty members of the U.S. armed forces and/or their dependents.
It seems that even the holiday season can’t put the brakes on compliance initiatives. As of December 14, 2017, creditors providing credit-related products and services, like GAP, Credit Life, Credit Disability or cash-out financing, must now comply with a full range of duties and restrictions imposed by the MLA. While this interpretation didn’t go into effect until December, it applies to all transactions going back to October 3, 2016.
Auto lenders and dealers are now spending the first month of the new year consulting with their legal counsel to determine whether to continue to offer such products and services to active duty military consumers and their dependents, and if so, what actions must be implemented to comply with MLA requirements.
History of MLA
Congress passed the MLA in 2006 to help protect active duty service members and their dependents from predatory lending. Since 2015, the DOD has been slowly amending the final rule to expand the scope of the MLA to include the majority of closed and open-ended loans.