While the initial Military Lending Act (MLA) applied only to payday loans, vehicle title loans, and tax refund anticipation loans, the amended MLA Final Rule, issued in 2015, applies to all consumer credit that’s subject to a finance charge or is payable by a written agreement in more than four installments.

Examples of closed-end loans that may be covered by the rule include:

• Installment loans.
• Private student loans.
• Land loans not secured by a dwelling.
• Small dollar loans including payday alternative loans made under NCUA's regulations.
• Payday loans.
• Vehicle title loans.
• Refund anticipation loans.

Examples of open-end loans the rule may cover include overdraft lines of credit, unsecured open-end lines of credit, and credit cards.

Compliance with MLA was required by Oct. 3, 2016, for all open- and closed-end loans not exempt from the final rule, except for credit card accounts which had a compliance date of Oct. 3, 2017.

The MLA Final Rule doesn't apply to residential mortgages. This includes loans to finance the purchase or initial construction of the dwelling, any refinance transaction, home equity loans or lines of credit, or reverse mortgages.

It also does not apply to any loan:

• That’s expressly intended to finance the purchase of a motor vehicle when the loan is secured by the vehicle being purchased.
• That’s expressly intended to finance the purchase of personal property when the loan is secured by the property being purchased.
• That’s exempt from the requirements of Regulation Z.
• In which the consumer is not a covered borrower at the time the loan is consummated.

Who is a ‘covered borrower?’

The MLA Final Rule defines a “covered borrower” as a member of the armed forces who is serving on active duty, those under a call or order of more than 30 days, or a dependent of a covered borrower.

It also includes active Guard and Reserve duty, which means active duty performed by a member of a reserve component of the Army, Navy, Air Force, or Marine Corps, or full-time National Guard duty performed by a member of the National Guard pursuant to an order requiring full-time National Guard duty for a period of 180 consecutive days or more for the purpose of organizing, administering, recruiting, instructing, or training the reserve components.

However, a servicemember who is no longer on active duty wouldn't be considered a covered borrower. This distinction is important because if the servicemember is no longer a covered borrower, the loan is no longer covered by the MLA Final Rule.

Servicemembers’ dependents

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The MLA Final Rule defines dependents as:

• A servicemember’s spouse.
• A servicemember’s child or children under the age of 21 or under the age of 23 if enrolled in a full-time course of study at an institution of higher learning approved by the Secretary of Defense.
• A servicemember’s child who is incapable of self-support because of a mental or physical incapacity that occurs while a dependent of a servicemember and/or is dependent on the servicemember for more than half of the child’s support.
• A servicemember’s parent or parent-in-law residing in the servicemember’s household who is (or was at the time of the servicemember’s death, if applicable) dependent on the servicemember for more than 50% percent of their support.
• An unmarried person who is not a dependent of the servicemember under any other subparagraph over whom the servicemember has custody pursuant to a court order for a period of at least 12 consecutive months and is under the age of 21 or under the age of 23 and is enrolled in a full-time course of study at an institution of higher learning approved by the Secretary of Defense, or is incapable of self-support because of a mental or physical incapacity that occurred while the person was considered a dependent of the servicemember and is dependent on the servicemember for more than 50% of the person’s support.

Learn more at the CUNA Compliance Community.

MIKE McLAIN is CUNA’s senior federal compliance counsel.