The Talent-Nelson Military Lending Act (“MLA”) was initially enacted in 2006.
The legislation was written to protect the credit rights of servicemembers through a number of regulatory measures such as capping interest rates at 36%, banning mandatory arbitration, and various other consumer credit restrictions. It was recently extended to cover more consumer credit exchanges.
Initially, the scope of the MLA was relatively narrow. The Department of Defense restricted what would be considered “consumer credit,” including only specific payday loans, auto title loans, and refund anticipation loans. However, the changes implemented on October 3, 2016, expand upon what falls under “consumer credit” to include the following:
- All payday loans, auto title loans, refund anticipation loans, and those structured to avoid DoD restrictions
- Installment loans
- Any non-purchase money loan secured by the consumer’s automobile
- Private student loans
- Loans on the consumer’s future income stream
- Certain overdraft loans
- Any form of tax-time credit
- Purchase money loans where the amount of credit extended exceeds the amount needed to purchase the goods
- Any other form of consumer credit other than home mortgages, purchase money loans and credit cards (the restrictions on credit cards do not go into effect until later)
Other modifications include a widening of what is considered “finance charges,” which extends transactions that must stay below a 36% interest rate. There is also an extension on what types of credit transactions are protected against enforceable arbitration. All of these changes constitute a substantial expansion of the protective legislation that affects 3 million people. For a more extensive rundown of the extensions, click here.