Last year ended with a surprise to the powersports finance industry — and not a good one. The new year opened with chaos, all compliments of the Department of Defense’s December 2017 pronouncement on what its Military Lending Act (MLA) rule does or does not cover.
Both dealers and finance companies asked: Are my powersports finance transactions covered by the MLA? Then, how can GAP waivers be sold to servicemembers who want it? and What do I do about past transaction that occurred after Oct. 3, 2016? Are you sure this is what you meant?
As you probably know, the cause for all these questions is a Dec. 11, 2017, Department of Defense (DoD) interpretive rule clarifying what the DOD meant in a MLA rule it published in 2015.
Let’s review. The MLA was enacted in 2007 and later amended by Congress in 2013. It provides protections to “covered borrowers,” who are generally servicemembers and their dependents. Originally, the MLA’s protections applied only to certain products — payday loans, title loans, and refund anticipation loans. However, in 2013, Congress extended these protections to a much broader range of closed-end and open-end credit products. However, it included two exceptions to its general rule: purchase-money personal property secured financing and purchase-money motor vehicle secured financing.
