IBA Compliance Connection

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Our Military Lending Act (MLA) policy for 2018 includes the following clause in the definition of consumer credit: “Additionally, until October 3, 2017 consumer credit does not mean credit extended in a credit card account under an open-end (not home secured) consumer credit plan. (This date may be extended by order of the Secretary of Defense to a date not later than October 3, 2018.)” Should we include this language in our 2019 policy?

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No, we do not recommend including this language in your 2019 MLA policy, as the exemptions for credit cards from the definition of “consumer credit” referenced in the language now have expired.

The MLA regulations set forth a Military Annual Percentage Rate (MAPR), which caps at 36% the annual rate charged for consumer credit extended to servicemembers and their dependents. In 2015, the Department of Defense expanded the definition of “consumer credit” to extend the protections of the MLA to a broader range of credit products.

The expanded definition generally applied to consumer credit established on or after October 3, 2016. However, “credit extended in a credit card account under an open-end (not home-secured) consumer credit plan” was not included in in the definition of “consumer credit” until October 3, 2017, with the possibility of a one-year extension to October 3, 2018. As both deadlines now have expired, your MLA policy no longer needs to reference these exemptions.

For resources related to our guidance, please see:

  • MLA Rules, 32 CFR 232.3(f)(1) (“Consumer credit means credit offered or extended to a covered borrower primarily for personal, family, or household purposes, and that is: (i) Subject to a finance charge; or (ii) Payable by a written agreement in more than four installments.”)
  • MLA Rules, 32 CFR 232.1(c)(2) (“This part . . . Requires a creditor to provide to a covered borrower a statement of the Military Annual Percentage Rate, or MAPR, before or at the time the borrower becomes obligated on the transaction or establishes an account for the consumer credit. . . .”)
  • MLA Rules, 32 CFR 232.4(b) (“A creditor may not impose an MAPR greater than 36 percent in connection with an extension of consumer credit that is closed-end credit or in any billing cycle for open-end credit.”)
  • MLA Rules, 32 CFR 232.13(c) (“(1) In general. Notwithstanding § 232.3(f)(1) and subject to paragraph (c)(2) of this section, until October 3, 2017, consumer credit does not mean credit extended in a credit card account under an open-end (not home-secured) consumer credit plan. (2) Authority to issue an order to extend exemption. The Secretary, or an official of the Department duly authorized by the Secretary, may, by order, extend the expiration of the exemption set forth in paragraph (c)(1) of this section, until a date not later than October 3, 2018.”)