The CFPB has updated its procedures and provided guidance on what it looks for when examining and identifying consumer harms and risks related to the Military Lending Act rule. Based on a final rule issued by the Department of Defense in which the credit products covered by the MLA was expanded, creditors must comply with the following requirements when entering into credit transactions with active service members or their covered dependents. Specifically, creditors:
- Cannot charge more than 36% “Military Annual Percentage Rate,” which is generally determined when finance charges, credit insurance premiums/fees, add-on fees for ancillary products sold in conjunction with the credit transaction, as well as application fees are combined in the credit transaction;
- Cannot require borrowers to relinquish certain rights granted by state or federal laws, such as requiring mandatory arbitration or the Servicemembers Civil Relief Act; and
- Cannot require borrowers to arrange for a Military Allotment as a prerequisite to qualify for a loan
To address these updates, CFPB examiners will specifically focus on the creditors’ actions taken to update policies and procedures, and efforts to train staff. Click here to view the revised MLA procedures and requirements.