Instant verification ensures compliance
The Department of Defense (DOD) significantly expanded the scope of the Military Lending Act (MLA) to broaden the definition of customer credit and included a “safe harbor” from liability for lenders who verify MLA status of applicants. The new rule became effective on October 3, 2015, and lenders must be compliant by October 3, 2016. DOD was responsible for implementing the rule and the enforcement will be led by the Consumer Financial Protection Bureau (CFPB).
Lenders, under the DOD rule, must check each credit applicant to confirm that they are not a service member, spouse, or the dependent of a service member, through a nationwide consumer reporting agency (CRA) such as FactorTrust. Verifying MLA eligibility is mission critical to avoid financial and reputational risks for failing to comply.
When is verification required?
- Credit extended (or offered) for personal, family, or household purposes and
- Has a finance charge of 36% military annual percentage rate (MAPR) for military members, which includes fees and ancillary add-ons or paid in less than 4 installments
What is the Military Annual Percentage Rate (MAPR)?
- Covered credit transactions are capped at a 36% MAPR. The MAPR amount must also include the following:
- Credit Insurance Premium or Fee
- Debt Cancellation or Debt Suspension Fee
- Fees for Ancillary Products Sold in Connection with the Credit Transaction (e.g. Credit Default Insurance and Debt Suspension Plans)
- Finance Charges
- Application Fee
MLA Check from FactorTrust helps lenders meet the MLA requirements efficiently through a real-time search of the applicant’s name and social security number. The system will verify whether or not the applicant is a covered borrower using information from the Department of Defense’s MLA Database.
How are covered borrowers and/or their dependents identified in the MLA search?
- FactorTrust scans our comprehensive, proprietary database against the MLA covered borrower database (Department of Defense)
- The MLA database contains information on all active duty military personnel and their dependents age 18 and older
- Dependents under the age of 18 are not included
- The databases do not distinguish between military members and dependents
- All are considered covered borrowers under the MLA
- If a consumer questions whether or not they are included as a covered borrower, they should be directed to the Defense Manpower Data Center (DMDC)
Ease of Use
The platform streamlines the verification through the MLA database. Information may be used independently or packaged to leverage the waterfall decision support infrastructure. FactorTrust cycles data against DMDC database to identify consumers that are MLA covered.
IF YOU ARE A LENDER LOOKING TO COMPLY WITH THE REGULATION, CALL 1-844-205-4111 or fill out the form on the right.