Effective October 3, 2016, new regulations under the federal Military Lending Act (“MLA”) will bar financial institutions that extend consumer credit to covered US service members from charging a military annual percentage rate (MAPR) of interest greater than 36 percent. The new regulations expand the MLA’s 36 percent MAPR limit to additional types of consumer credit transactions (beyond just payday, vehicle title and tax refund anticipation loans) to active duty members of the armed forces and their dependents. The new rule also changes how a lender may determine whether an applicant is a covered borrower and modifies the disclosures required for those borrowers.
The October 3 compliance date is particularly important, as the MLA’s enforcement provisions include criminal and civil liability for noncompliance and provide for a private right of action. This Legal Update summarizes the Department’s new MLA’s regulations, discusses provisions specific to credit card providers and credit unions, and highlights the penalties and liabilities for noncompliance.