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Reversal sought on recent interpretation of Military Lending Act

March 9, 2018
The Department of Defense (DOD) in late 2017 issued a "surprise" interpretation of the Military Lending Act (MLA) that imposes substantial obligations on dealers who extend financing for certain credit-related products or services (e.g., GAP, credit life, and credit disability products) to active members of the U.S. armed forces and their dependents. 
The National Automobile Dealers Association has been pushing to reverse the DOD’s interpretation of the MLA on a variety of fronts including: 
• seeking to meet with DOD Under Secretary of Defense (Personnel and Readiness) Robert Wilkie, to explain the interpretation’s multiple flaws and adverse consequences and to request its immediate withdrawal; 
• meeting with the DOD office that issued the interpretation, outlining dealer’s concerns, and submitting a joint NADA-American Financial Services Association petition seeking the immediate withdrawal of the interpretation; 
• providing Under Secretary Wilkie, the White House, and other government officials with written submissions detailing the same; 
• coordinating a similar request to the DOD from the American Bankers Association; 
• coordinating with numerous other industry groups (e.g., the Consumer Bankers Association, the Credit Union National Association, the U.S. Chamber of Commerce, the Guaranteed Asset Protection Alliance, and the Consumer Credit Industry Association) to support expedited DOD action to withdraw the interpretation; 
• working with key U.S. senators to advise the DOD of the urgent nature of the pending request to correct the flawed interpretation; and 
• providing detailed compliance information to dealers and their legal counsel through e-mails, webinars, conference calls, and posts in various online forums.
Only retail sales involving the financing of credit-related products or services are at issue with the new interpretation; lease transactions are not covered by the MLA. 
Dealers must first determine whether a customer is covered by the MLA (either an active military member or the dependent of an active military member). There are specific notations on customers’ credit reports which state whether customers fall within these categories. Dealers also can check the MLA’s website to confirm a customer’s military or dependent status.