MLA is the Military Lending Act that is enforced by the Department of Defense (DOD). The Final Rule amends the previous version of the MLA enforced around 2007. The new MLA updates went into effect on October 3, 2016. Below are some key facts to consider:
- No more than 36% MAPR (Military APR) is allowed to be charged to any military member that falls under the MLA.
- The MAPR includes the following:
- Credit Insurance premiums/fees
- Debt Cancellation contract fees
- Debt Suspension agreement fees
- Fees associated with ancillary products
- MLA typically applies to any full-time active duty Service member or those under a call or order of more than 30 days. The Final Rule also covers Service member’s dependents.
- The Final Rule covers “Consumer Credit” and appears to imply unsecured debt because it does not apply to 5 categories of transactions:
- Residential Mortgages
- Motor vehicle loan secured by the purchased vehicle
- Personal property secured by the purchased property
- A transaction not subject to Reg Z
- A transaction where the borrower is not a covered borrower
- Closed-end credit MAPR will be a one-time calculation but any open-end credit will need to be calculated each billing cycle.
Fiserv has developed a new LAS program to help banks identify loans that have a calculated MAPR above 36% and also help identify any amounts that may need to be waived in order to stay compliant. Banks can adjust the threshold of when loans would appear on suspect reports.