On August 1, six banking industry trade groups submitted a joint comment letter relating to a proposal by the Department of Defense (DOD) to revise protections under the Military Lending Act (MLA), which apply to consumer credit extended to members of the military and their families. Among other things, the MLA caps the annual interest on short-term, small-dollar loans — including certain payday, car title, and refund anticipation loans. The MLA does not currently include credit cards, bank loans secured by funds on deposit, installment loans, or open-end credit.
In June, the DOD issued an advanced notice of proposed rulemaking (ANPR) to solicit input on potential changes to the definition of “consumer credit” in the regulations that implement the MLA, which would significantly broaden its application. The ANPR sought comment on whether the definition of “consumer credit” should be revised to expand coverage of the MLA to additional small-dollar loan products. The trade groups suggest that expanding coverage would be redundant, costly, and confusing in light of the “well-established system of financial protections for consumers [that] exists beyond the [MLA].” In other words, there is no need to create an entirely separate class of credit products for servicemembers and their families not directly related to military service.
The trade groups specifically identify several potential negative consequences of expanded coverage, including reduced access to installment loans and other credit products, and inability to refinance existing credit. On balance, the trade groups view the current rules — adopted after plenary discussion and careful consideration by all stakeholders — to be effective in achieving the proper balance between protecting military families and ensuring their access to credit. Thirteen state attorneys general took an opposing view in a comment letter submitted on June 24.
For additional commentary on the ANPR, please see the recent article from BuckleySandler Partners Kirk Jensen and Valerie Hletko.