The 2013 Defense Authorization Bill (H.R. 4310), currently awaiting signature by President Obama, makes several changes to the Military Lending Act. Last week, both the House and Senate agreed to the conference report. The MLA, as implemented by rules issued by the Department of Defense, imposes a 36% rate cap on tax refund loans and certain payday and auto title loans made to active duty armed forces members and their dependents, and prohibits certain terms in such loans.
Previously, the MLA did not expressly give enforcement authority to any federal regulator. The bill gives federal regulators MLA enforcement authority that tracks their Truth in Lending Act enforcement authority. This means that the CFPB would have exclusive authority to enforce the MLA against payday lenders and would share enforcement authority with the FTC as to other non-bank lenders. The CFPB is heavily focused on military affairs and already examines banks and non-banks for compliance with the Servicemembers’ Civil Relief Act.
The bill also adds a civil liability provision that allows private actions for MLA violations to be filed in federal court. While the bill provides for actual damages, it could be read to require payment of at least $500 in damages even if the actual damages sustained were less.
For purposes of who is entitled to the MLA’s protections, the bill replaces the MLA’s current definition of “dependent” with the definition of “dependent” used to determine eligibility for medical and dental care provided to servicemembers. Under the new MLA definition, unremarried widows and widowers and certain unremarried former spouses of servicemembers would be included as “dependents.”
This bill puts much more teeth in the MLA. Banks and non-banks covered by the MLA should promptly review their practices to ensure they are in compliance with the MLA. We are already assisting many lenders in reviewing their practices.