04 Nov Are you MLA compliant?
By Noah Fitzgerald, CPP and Jesse Berger, JD
The Military Lending Act (MLA) was passed by Congress in 2006 to protect active duty U.S. service members and their families from excessive interest rates. There are currently about 4.5 million active and reserve military personnel and dependents, with about 87% of those residing in the U.S. or U.S. territories. If you operate within the U.S., you must be aware of what the MLA means for you.
As originally passed, it enacted change along three lines: It capped the APR for covered products to 36%, it required military-specific loan disclosures, and it kept creditors from forcing those covered by the law to submit to arbitration in the event of a dispute. The original version of the law covered only three closed-end loan products: 1) payday loans, 2) auto title loans, and 3) tax refund anticipation loans.
The updated version
As of October 3, 2016, lenders became subject to new MLA rules which:
- expanded the definition of “consumer credit” to align with the Truth in Lending Act
- cover a wider range of credit transactions excluding residential mortgages and vehicle purchase loans
- allow credit-related fees to be added as a product fee in addition to the 36 percent maximum APR
Lenders must now check each applicant’s military status
The rule requires lenders to check credit applicants and confirm that they are not a service member or dependent of a service member. Merchant Boost has built the most accurate and cost-effective MLA Validation product available. MLA Validation has built in redundancy to make sure that lenders always have immediate access needed at the time of consumer application. MLA Validation can be used standalone through our Decision Boost platform or can be packaged with our revolutionary Pre-Boost suite.
At Merchant Boost, we specialize in helping you run an efficient, compliant business. We are a leading provider of business information and financial technology solutions. We can help you improve both customer acquisition and payment strategies.