On July 21, 2015, the U.S. Department of Defense issued a final rule that broadened the types of credit products covered by the 36% rate cap under the Military Lending Act.
This change brings the regulation in alignment with the traditional definition of credit covered by the Truth in Lending Act. What does this ruling mean for lenders offering consumer credit transactions?
Effective on October 1, 2016, active-duty service members and their dependents will qualify for a maximum annual interest rate cap of 36-percent on consumer loans, excluding residential mortgages, purchase monies, and first-lien personal property loans. Certain fees, previously excluded from interest rate calculations, will now be included in this interest rate cap, now
known as the MAPR (Military Annual Percentage Rate). The new regulations are to
ensure that legal protections are offered to American service members with regards to lending practices.
As part of the final rule, the DMDC (Defense Manpower Data Center) will be creating a web service database that will allow lenders a direct interface into their identity management system. This will provide a “Safe Harbor” for lending institutions to identify, authenticate, and provide authorization for active-duty service members and their dependents who will qualify for the protections offered under the Military Lending Act final rule. The DMDC is also considering integrating with three key credit bureaus in order to provide this authentication service.
GOLDPoint Systems is proactively anticipating these changes and is working towards software changes that will assist in compliance with the new regulations. We have formally requested access to the DMDC database in order to determine active military status on behalf of all our valued lending clients. As more information becomes available from the DMDC, rest assured that we are aware of all regulatory requirements and moving forward with design protocol in a timely manner to ensure compliance by the October 1, 2016, deadline. As a leader in the lending software business, we work hard to provide our clients with well-designed software tools to ensure they are up-to-date with the latest regulatory compliance changes.