Military Lending Act (MLA)

The December 2017 Recent Interpretation of the Military Lending Act Affects Sales of GAP to Active Duty Service Members & Their Dependents

Military Lending Act (MLA) protections went into effect on October 3, 2016. In December of 2017, it was amended.  The updates to the MLA included credit products not previously covered under the Act which specifically affects the auto industry. To that extent, the new interpretation gives additional protections to active-duty personnel, spouse and dependents. This blog aims to review the relevant changes. 


The new protections include:

  • Limiting APR to 36 percent

  • Military-specific disclosures

  • A prohibition against required arbitration in the event of a dispute


Generally speaking, prior to the new interpretation, financing of vehicles was  exempt from the MLA requirement.  On December 14 2017, however,  the Department of Defense (DoD) issued an amended rule that stated:

[A] credit transaction that finances the purchase of a motor vehicle (and is secured by that vehicle), and also finances optional leather seats within that vehicle and an extended warranty for service of that vehicle is eligible for the [exemption]. (Federal Register, Vol. 82, No. 239, page 58740, December 14, 2017.) Good news so far.


That said, the unfortunate news was  that it also stated: [A] credit transaction that includes financing for Guaranteed Auto Protection insurance or a credit insurance premium would not qualify for the [exemption]. (Federal Register, Vol. 82, No. 239, page 58740, December 14, 2017; emphasis added.)


We recommend all dealers seek guidance and advice from and attorney or regulatory compliance advisor regarding this new interpretation of the rule. Additionally, if you determine your business is not exempt from the MLA requirement, it is essential you verify active-duty military status based on information provided by the Department of Defense on every loan application you process.  Performing this one vital step will allow you to satisfy the safe harbor provision of the MLA.

We offer  a solution to this burden with real-time verification of active-duty military status directly from the DoD, available as an add-on to every credit report inquiry request.  More specifically, on the credit report, you will receive a “Covered” or “Non-Covered” response based on information from the DoD. This will enable you to maintain MLA compliance and meet the safe harbor provision.


What are the consequences of violating the MLA Rules?

It depends... Knowingly violating the MLA or its implementing regulation is a misdemeanor under the criminal code of the United States!  Penalties include a fine and imprisonment of not more than one year.  Also, a person who violates the MLA and its implementing regulation is civilly liable to a covered borrower for:

  • Any actual damages resulting from the violation, but not less than $500, for each violation;

  • Appropriate punitive damages;

  • Appropriate equitable or declaratory relief;

  • Costs of the action and reasonable attorney fees as determined by the court, where the covered borrower succeeds in the action; and

  • Any other relief provided by law.

To schedule a demo on how we can give  MLA Status check, please fill out this form:





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DBA American Credit Systems, 2020. The Punt Group, LLC

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