The Department of Defense has extended the deadline for requesting direct access to its Military Loan Act (MLA) Defense Manpower Data Center (DMDC) database until February 15, 2016. Under amendments to the MLA's implementing regulations that became effective last October, a lender that uses the database to determine whether an applicant is a MLA-covered borrower is eligible for a safe harbor from liability. (A safe harbor is also available to a lender that uses a consumer report from a nationwide consumer reporting agency.)
The amendments dramatically expanded the MLA's scope which was previously limited to only three types of consumer credit extended to active-duty service members and their dependents: closed-end payday loans with a term of 91 days or less in which the amount financed does not exceed $2,000, closed-end vehicle title loans with a term of 181 days or less, and closed-end tax refund anticipation loans. The amendments extended the MLA's 36 percent interest cap and other restrictions to a host of additional products, including credit cards, installment loans, private student loans and federal student loans not made under Title IV of the Higher Education Act, and all types of deposit advance, refund anticipation, vehicle title, and payday loans. (Residential mortgages and purchase-money personal property loans are excluded). The amendments apply to consumer credit transactions or accounts consummated or established after October 3, 2016, for most products, and after October 3, 2017, for credit cards..
An extension of the DMDC request deadline, originally set for February 1, was sought by a number of industry trade groups. Direct access to the database allows a greater volume of inquiries to be processed instantaneously and avoids a potential delay of up to 24 hours that can occur if a lender submits requests to the DMDC website instead of accessing the database directly. The website and database also allow lenders to access information about dependents under the age of 18.
The database is an important compliance resource for lenders, who face serious penalties and remedies for MLA violations. Agreements that violate the MLA are void from inception, and knowing violations constitute a misdemeanor. Private plaintiffs may recover actual damages of not less than $500 per violation, plus punitive damages, attorneys’ fees, and other remedies. In addition, depending on which agency has Truth in Lending Act jurisdiction over the lender, the Consumer Financial Protection Bureau and Federal Trade Commission can exercise enforcement authority.
