DoD Announces Proposed Changes to Military Lending Act

DoD News, Defense Media Activity

WASHINGTON, Sept. 26, 2014 - Defense Department officials today announced a proposed overhaul of the Military Lending Act, which is designed to protect service members and their dependents during consumer credit transactions.

The proposed changes to the regulation would reduce predatory lending practices, expand protections provided to service members, close loopholes in current rules and help to ensure military families receive important consumer protections, officials said. 


On Sept. 29, the proposed regulation will be published in the Federal Register for public comment, officials added, and the proposal includes several questions that will help the department gather additional information on the proposed changes. 

The Military Lending Act was first passed in 2006. Congress amended the act in the fiscal year 2013 National Defense Authorization Act. The amendments beefed up consumer protections and expanded the definition of borrowers covered by the act. 

At the same time, Congress requested that the secretary of defense survey troops, financial counselors and legal assistance attorneys to determine the impact and prevalence of high-cost loans. In April, the department reported to Congress that the survey indicated that troops generally have sufficient access to safe, low-cost credit, few problems managing their finances, and that high-cost credit products are not widely used by service members. 

The department worked with federal regulators to implement the changes made by Congress in the 2013 NDAA and to develop responsible protections for service members and their families that preserve their access to credit and protect their financial futures. 

The proposal provides several significant protections to active duty service members and their families. 

-- A cap of 36 percent on the annual percentage rate of interest charged for credit products covered by the regulation -- including credit cards -- referred to as the Military Annual Percentage Rate; 

-- Additionally, creditors are responsible for providing military borrowers with additional disclosures, including a statement that they should seek other options than high-cost credit -- to include financial counseling and assistance from the Military Aid Societies; 

-- Creditors are prohibited from requiring service members to submit to arbitration, waive their rights under the Servicemembers' Civil Relief Act, or imposing onerous legal notice requirements as a result of taking one of these loans; and 

-- The proposed changes would expand the definition of "consumer credit" covered by the regulation and bring any closed- or open-end loan within the scope of the regulation, other than a loan secured by real estate or a purchase-money loan (including a loan to finance the purchase of a vehicle). 

 *Related Sites:*

Obama Administration Proposes New Regulations to Expand Important Financial Protections for Military Families [ ]

Proposed changes to the Military Lending Act [ ]

The Defense Department on Facebook [ ]

The Defense Department on Twitter [ ]

DoD News on Facebook [ ]

DoD News on Twitter [ ]

DoDLive Blog [ ]

DoD Video News [ ]