August 31, 2016

ALA Members and Friends:

For those of you who will continue to make Covered Loans to Covered Borrowers after October 3rd, the following information from AFSA and the attached Military Lending Act Guidance from the Department of Defense will be useful. Remember that even if you do not intend to be making loans to Covered Borrowers, you must “scrub” your applicant to make certain that he or she is not a Covered Borrower. Checking with your credit reporting agency, or checking the Department of Defense Database are the basic methods for retaining a “safe harbor” after October 2nd. (The current separate statement signed by the applicant will no longer protect you after that date.) And, the penalties for violating the law and regulation are severe including: imprisonment for creditors who knowingly violate the law, the contract is void, a civil penalty of not less than $500, and attorneys’ fees and court costs.

Please let me know if you have any questions. Maury

The DoD issued the attached guidance interpreting its regulation implementing the MLA. The guidance answers some questions posed by AFSA and its members, but unfortunately does not address all of our concerns. The DoD has said that it remains open to talking with the financial services industry. However, we do not expect more guidance at this time. We’re looking for opportunities to work with the DoD as they educate service members and their families about the MLA.

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