Effective October 3, 2016, loans offered to military service members and their families must adhere to the MLA. Here is some more information about the MLA's rules and regulations, including an answer to the question many people ask: what does MLA stand for?

What Does MLA Stand For?

MLA stands for Military Lending Act. This act was originally enacted in 2006 to protect military service members and their families from questionable lending practices. In 2015, additional rules and regulations were enacted that expanded these protections for service members and their families. Lenders were required to comply with these new rules by October 3, 2016, although credit card companies did not have to comply with the changes until October 3, 2017.

Which Loans Are Covered by the MLA?

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Beginning in October 2016, the following consumer loans obtained by service members and their families, also referred to as dependents, must comply with the new regulations:

  • Deposit advance products
  • Installment loans with some exceptions as listed below
  • Overdraft lines of credit (not including traditional overdraft services)
  • Payday loans
  • Vehicle title loans

Which Loans Are Excluded?


If the service member or family member takes out loans with credit secured by the property being purchased, they will not be protected under the MLA. Here are some other examples of loans not covered by the MLA:

  • Home equity loans
  • Lines of credit
  • Mortgage refinancing
  • Motor vehicle loans (where financing is secured by the vehicle itself)
  • Personal property loans (where the credit is secured by the property itself)
  • Residential loans (where financing to build or buy is secured by the home itself)
  • Reverse mortgages

How Does the MLA Protect Service Members?

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The MLA was issued by the Department of Defense (DoD) and is enforced by the Consumer Financial Protection Bureau (CFFB). Following its launch in October of 2015, all service members who took out qualifying loans were automatically protected.

When you ask what does MLA stand for, you must also address the question of how it protects military service members and their families. Here is what the MLA was enacted to do:

  • Limits the military annual percentage rate (MAPR), including fees for applicable products, to 36 percent
  • Requires specific disclosures for military service members
  • Prevents creditors from requiring arbitration with service members in a dispute

The intention of the law is to protect military service members and their families from risk from specific lending practices. These practices could contribute to a threat to the readiness of the military. It could also affect the retention of those in military service.

Who Is Covered Under the MLA?


Military Service members serving more than 30 days on active duty in the Army, Navy, Marine Corps, Air Force, or Coast Guard are covered under the MLA. Those who serve in the Active Guard or Reserve as defined in 10 U.S.C. 101(d)(6) are also covered under the MLA.  The military service member's dependents are also covered under the MLA. Dependents are defined by the DoD and the MLA as follows:

  • A spouse
  • Children under 21 years of age
  • Children under 23 years of age enrolled full-time as a student and dependent on the service member for over one half of their support
  • Children of any age incapable of supporting themselves due to a disability and dependent on the service member for over one half of their support

What Are the Latest Regulations?


A reminder: what does MLA stand for? It is the Military Lending Act. When the MLA was originally enacted, it covered the following closed-end loans: payday loans, auto title loans, and tax refund anticipation loans. 

 

Now the latest regulations cover a more broad definition of consumer credit. This was done to make the MLA more in sync with the Truth in Lending Act (TILA) and Regulation Z. The MLA does cover more transactions today than it did in 2006, but it still does not extend protections to residential mortgages and credit secured by personal property, including loans used for buying automobiles.

What Does the Amended MLA Cover?


The amended regulations now cover the following types of products: credit cards, deposit advance loans, installment loans, and unsecured open-lines of credit. The credit affected includes credit extended to the military service member or family member primarily for personal, family, or household purposes. It also must be subject to a finance charge and payable by a written agreement in more than four installments.

Limiting Fees


When asking what does MLA stand for, it's important to know more than just what the acronym means. You also need to understand how the MLA affects loans.


The MLA sets a limit on the interest charged to military service members and their families. The military annual percentage rate (MAPR) is to be capped at 36 percent. This percentage is to include all fees and interest related to a loan. These fees could be associated with ancillary products such as credit default insurance, debt suspension plans, credit insurance premiums, debt cancellation fees, and some application, participation, and annual fees.

Lender Requirements Under MLA


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Lenders are required by the DoD to check credit applicants to ensure that the person applying for the loan is not a military service member or dependent (defined as a spouse or child of a military service member). Lenders can use DoD database, knowns as the Defense Manpower Data Center (DMDC) in order to verify this information.  


Lenders will be allowed to access information in the DMDC to verify military service. Using the DoD database, lenders can request information for a single record request or a multiple record request. A multiple record request allows the lender to request information for multiple individuals or for multiple dates for the same individual.


A lender enters personal information about the military service member or family member, including the person's name, social security number, and birth date, to obtain this information. Lenders are covered under a safe harbor rule in identifying a military service member or family member if they use the MLA database as provided by the DoD or use consumer reports from a nationwide consumer credit institution.


In addition, creditors are required to tell military service members and their families that they have certain rights under the MLA. Written and oral explanations are required for the MLA in addition to other disclosures required by TILA.

Who is Covered Under the MLA?


Another important part of the answer to the question of "what does MLA stand for?" is who it protects. A military service member and their dependents are covered under the MLA. If a military service member leaves the military, they are no longer covered under the MLA. In addition, their dependents are no longer covered under this provision.

No Arbitration Required


The MLA prevents creditors from forcing military service members and their families to be part of a mandatory arbitration. In addition, it prevents military service members from waiving their rights under the Service Members' Civil Relief Act. Finally, it prohibits military service members from providing a payroll allotment in exchange for credit.

Restrictions and Penalties


Finally, when asking what does MLA stand for, it's important to know what restrictions it includes. The MLA prevents rollovers, renewals, or refinances of payday loans or other deferred transactions by creditors other than banks, thrifts, or credit unions. It also prohibits some types of loan terms such as penalties for prepayment and unreasonable notice requirements. There are penalties for lenders, both civil and criminal, for violations of the MLA.

Conclusion

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What does MLA stand for? It stands for the Military Lending Act. The Military Lending Act was enacted to protect military service members on active duty. The intention of the MLA is to safeguard military service members and their families from the risks associated with specific lending practices. These practices could negatively affect the preparedness of the military and the retention of those in military service.


Originally, this regulation limited the annual percentage rate, required certain information to be disclosed to the military service member, and prohibited arbitration involving military service members. It initially only includes a few types of consumer products like payday loans, auto title loans, and tax refund anticipation loans.


Today, the MLA covers a wider variety of consumer products, including overdraft lines of credit (excluding conventional overdraft services) and certain types of installment loans. Remember that residential, motor vehicle, and personal property loans with secured credit are not included under MLA. With this information, you shouldn't have to ask, "What does the MLA stand for?" You now have all of the information needed to answer that question.


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