The DoD’s rule and interpretive guidance are subject to multiple interpretations on this point. In our view, the more reasonable interpretation is that the MLA permits a lender to take a security interest in an account that is established prior to an extension of credit and that is unrelated to the transaction.

We understand that the plain language of the rule suggests the opposite conclusion — that security interests are limited to accounts created “after the extension of credit in an account established in connection with the consumer credit transaction.” However, we believe this language is a case of ill-conceived drafting, and that the DoD did not intend to restrict the ability of creditors to obtain security interests in this way. While the DoD guidance does little to clarify this awkward drafting, we believe it is reasonable to interpret the guidance as permitting security interests regardless of when the account was created or whether the account was established in connection with the covered transaction.

We note that both we and several other trade associations have attempted to contact the DoD for clarification on this and other points in the MLA, with no response and no indication that clarifying guidance is forthcoming. Until the DoD issues clarifying guidance, the MLA remains open to more than one interpretation, so we do recommend that you consult with your bank counsel for further assistance in interpreting this rule and its guidance.

For resources related to our guidance, please see:

• MLA Regulations, 32 CFR 232.8(e) (“In connection with a consumer credit transaction with an MAPR consistent with § 232.4(b), the creditor may: . . . If not otherwise prohibited by applicable law, take a security interest in funds deposited after the extension of credit in an account established in connection with the consumer credit transaction.”)

• Department of Defense Interpretive Guidance, MLA Q&A #17