We all respect and value our service members and what they do to protect our freedoms every day. It’s an honor to get to work with these heroes and it goes without saying that we want them to receive loans that meet their needs on terms that protect them. One benefit to members of the military (active duty and their spouses/dependents) that you need to be aware of is the MLA. This was designed to protect service members and their families from predatory lending practices. It’s really important that you know how the MLA works and what to do to stay compliant.
Some points to know are the limit of 36% on the MAPR, restricts certain contractual provisions like mandatory arbitration, and to always use written AND verbal mandatory disclosures.
The MAPR (Military Annual Percentage Rate) is not the same as the APR we are familiar with. Unlike APR, the MAPR includes all costs associated with the extension of credit like fees, service charges, renewal charges, ancillary products like leather seats and credit insurance premium to name a few. According to the MLA the MAPR must not exceed 36%.
The MLA also prevents military members from being subjected to certain contractual provisions like mandatory arbitration. It is not uncommon for Retail Installment Contracts to have provisions mandating that the parties agree to arbitration should a future conflict arise, so make sure your contracts reflect the MLA requirements when needed.
Lastly, be mindful of walking them through the proper disclosures like MAPR and TILA’s both written and verbally. Remember, these guidelines have been put in place to protect these service members from predatory lending so it’s crucial that the disclosures are done properly. Failing to comply to the MLA can result in hefty fines and in some cases if the violations were found to be intentional, there may be criminal liability with fines and imprisonment.
To reference the complete MLA click https://www.fdic.gov/resources/supervision-and-examinations/consumer-compliance-examination-manual/documents/5/v-13-1.pdf.