• Department of Defense Releases New Military Lending Act Guidance
  • February 5, 2018 | Author: Christopher R. Rahl
  • Law Firm: Gordon Feinblatt LLC - Baltimore Office
  • The United States Department of Defense (DOD) released updated guidance under the Military Lending Act (MLA). The MLA imposes restrictions on the terms of credit extended to certain “covered borrowers.” In August 2016, the DOD released “Q&A” guidance to clarify certain aspects of the MLA. In the recent updated guidance, the DOD supplemented three of the answers for previous questions and added one more question and answer. The three prior questions and answers that are addressed are: (a) Q: whether a purchase-money loan is exempt from MLA coverage where an additional amount is advanced above the property’s purchase price (A: possibly, if the additional funds are to finance costs directly related to the property purchased—like leather seats, or negative equity for a trade-in—but not for costs less “directly related” such as the purchase of GAP); (b) Q: whether the MLA’s limitation on using a covered borrower’s check or other deposit account access prohibits a covered borrower from granting a security interest in a checking/savings account (A: no); and (c) Q: whether the MLA’s limitation on using a covered borrower’s check or other deposit account access prohibits a creditor from exercising rights under a statutory lien or from exercising rights under a security interest granted by a covered borrower (A: no). The updated guidance adds a new question and answer that involves the timing for making the safe harbor “covered borrower” determination and whether an individual’s status can be based on a determination made simultaneously with a credit application, or one made up to 30 days prior to an application. The answer notes that the determination can be made at the time of application (or during processing of the application), or can be based on a determination made within the previous 30-day window.