The U.S. Department of Defense on Tuesday issued the final Military Lending Act (MLA) rule to protect service members from predatory credit practices and grow their financial protections.

This rule applies protections of the MLA to all forms of payday loans, installment loans, unsecured open-end lines of credit, credit cards, vehicle title loans, refund anticipation loans and deposit advance loans, according to the news release.  

The regulation offers several protections extended to active duty service members and their families, including:

  • A 36% Annual Percentage Rate limit. The cap, referred to as the Military Annual Percentage Rate or MAPR, covers all interest and fees associated with the loan. This limit includes charges for most ancillary “add-on” products such as credit default insurance and debt suspension plans.

  • The MLA prohibits creditors from requiring service members to: submit to mandatory arbitration and onerous legal notice requirements; waive their rights under the Service Members’ Civil Relief Act; provide a payroll allotment as a condition of obtaining credit (other than from relief societies); be able to refinance a payday loan; or be able to secure credit using a post-dated check, access to a bank account (other than at an interest rate of less than 36% MAPR), or a car title (other than with a bank, savings association or credit union).

  • The changes to definitions of credit in the final rule bring any closed or open-end loan within the scope of the regulation, except for loans secured by real estate or a purchase-money loan, including a loan to finance the purchase of a vehicle.

"This new rule addresses a range of credit products that previously escaped the scope of the regulation, compromising the financial readiness of our troops,” said Deputy Secretary of Defense Bob Work in a news release. “Today, with our regulatory and enforcement partners, we stand united in support of our service members and their families.”

Congress passed the MLA in 2006 with bipartisan support to provide specific protections for active duty service members and their dependents in consumer credit transactions. The DOD asked the public for their perspective on changing the existing rule in June 2013, and published the proposed rule in the Federal Register for public comment Sept. 29, 2014.

To help industries comply with the MLA, the new rule will go into effect on Oct. 1, and have staggered compliance dates.

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