Department of Defense | Powersports Switchback

Contributing Author:
Steve Roennau
Vice President
EFG Companies

Powersports products have long been popular among active military and their dependents who find owning a car to be problematic, given the cost and their transitory lifestyle while on duty. The affordability and easy financing of motorcycles have made dealers and lenders eager to support this demographic segment. However, some regulatory wrangling by the Department of Defense (DOD) regarding the Military Lending Act (MLA) had caused some confusion.

Let’s step back and start at the beginning. Congress passed the MLA in 2006 to protect active duty service members and their dependents from predatory lending. Since 2015, the DOD has amended portions of the final rule to expand the scope of the MLA to include the majority of closed and open-ended loans. These amendments impacted traditional lenders like banks, savings and loans, credit unions, and credit cards.

At the end of 2017, the DOD issued a new interpretation of the MLA. Based on the interpretation, creditors providing credit-related products and services, like GAP, credit life, credit disability or cash-out financing, were also required to comply with a full range of duties and restrictions imposed by the MLA.

Contributing Author:
Glenice Wilder
Vice President
EFG Companies

Compliance is becoming a bellwether topic. Don’t believe me? Consider these three specific points. The Department of Defense released new guidelines in August regarding the Military Lending Act, which could have specific impact on powersports lending. And government agencies are known for looking out for their communities. Secondly, this year has seen a flurry of lenders entering the powersports market. Compliance is a requirement for all lenders – and new lenders will only partner with those dealers who have a compliance process. Thirdly, compliance was one of the hot topics at this year’s Powersports Finance Summit. So like it or not…compliance is here to stay for powersports dealers.

That being said, it’s time to ask yourself:

Are my F&I practices up to speed in the event of a compliance audit?
Is my team prepared for a detailed review – without sacrificing productivity?

How can you prepare your team for a compliance audit?

Let’s review a few pointers.

Organize your deal documentation. Create a checklist to put in the front of each jacket, and organize the paperwork according to the checklist. You’ll quickly see what’s missing – before the auditor spots the error.