The Department of Defense (DOD) issued a final rule amending the implementing regulations of the Military Lending Act of 2006 (MLA) in 2015. The final rule expands specific protections provided to service members and their Dependents under the MLA and addresses a wider range of credit products than the DOD’s previous regulation. FDIC-supervised institutions and other creditors must comply with the rule for new covered transactions beginning October 3, 2016. For credit extended in a new credit card account under an open-end consumer credit plan, compliance is required beginning October 3, 2017.
The Final Rule:
- Extends MLA protections, including the 36 percent Military Annual Percentage Rate (MAPR) cap, to a wider range of credit products, including credit cards.
- Modifies the MAPR to include fees for credit-related ancillary products sold in connection with the credit transaction, finance charges associated with consumer credit, and certain application and participation fees. Also, for credit cards, the MAPR excludes certain fees if bona fide and reasonable.
- Provides a safe harbor for creditors ascertaining whether a consumer is covered by the final rule’s protections.
- Modifies the existing prohibition on rolling over, renewing or refinancing consumer credit.
- Subjects creditors to civil liability and administrative enforcement for MLA violations.
What you should know:
Lenders will need to identify if the Consumer is covered by MLA protections at the point of origination in order to be extended Safe Harbor. To determine a consumers MLA covered borrower status, the lender must obtain this information directly or indirectly from the Department of Defense’s DMDC database. A search of the DMDC database requires the following: full legal name, social security number, and date of birth. There will be multiple options to select the MLA Covered Borrower status on a credit report.
Experian, Equifax, and TransUnion have 2 different methods to obtain MLA data.
- You can have the credit bureau set up your subscriber number to have the MLA Status returned automatically by default on each credit report that you receive.
- You can have Easy Access request the MLA status as an add-on to the credit report or as a standalone report by sending special keywords to the credit bureau.
While the easiest thing for Real Solutions to do would tell their customers to contact their credit bureau and just have it added to their subscriber number so they always get the MLA Data. However, there may be an additional fee for obtaining MLA data so Real Solutions and the credit bureaus decided to offer customers the ability to request this additional data only when the customer requests it.
Many companies pre-qualify their customers in many different ways, like pulling credit reports. But why spend more for this option if the customer won’t qualify for your product anyhow? Some customers don’t even pull credit reports but hold on to some sort of collateral (like bail bonds companies, pawn shops, and many others). But if these companies eventually are going to charge interest they need to have an MLA report on file. Thus the reason for adding MLA by request.
Whether you choose to get MLA data using either option #1 or #2 you will need to:
- Contact your legal or compliance department(s) to determine if your company needs the report include MLA data to adhere to regulatory and compliance policies.
- If so, let them know if you want it returned all of the time you pull a report or if you would rather have Easy Access request the report as either a standalone product or an add-on using keywords.
- Sign the required documents to be able to receive the reports with MLA data included.
Special note for Equifax customers: The MLA stand-alone or add-on reports are formatted differently when requesting a standard Plain Text report. Even if you elect to have Equifax return the MLA report automatically, you will still need to select the keywords in Easy Access so Easy Access can format the text report correct.
Special note for TransUnion customers: TransUnion offer’s an MLA add-on service by default or by request but currently does not have an MLA Standalone report as of the date this blog entry was written. Although, you are able to get the MLA report status by running a Model Report (08000) within Easy Access. If you decide not to have the MLA service returned on all of your credit reports, make sure TransUnion sets up a subscriber number to allow you to request the MLA service per transaction (also referred to as “keyword driven.”).
Special note for Profession and Enterprise customers. Since you integrate a process with Easy Access for pulling reports, if you decide to not to have the MLA data returned automatically and want to use Easy Access request it from the credit bureaus, you will need to setup and additional Department in Easy Access that defaults to the MLA keywords you want to be sent. For more info on Departments, Login and see this page in our online help file. For defaulting to certain products within departments Login and , see this page.