The Department of Defense (DoD) has adopted the attached final rule implementing § 670 of the John Warner National Defense Authorization Act for Fiscal Year 2007, known as the Talent Amendment. The final rule regulates the terms of certain credit extensions to active duty service members and their dependents. The law and rules take effect October 1, 2007. Additional protections for military personnel provided by the Servicemembers Civil Relief Act and other federal laws are also discussed below.
The DoD's final rule regulates the terms of certain credit extensions to active duty service members and their dependents.
The final rule applies to "consumer credit," which the DoD has defined as "payday loans," "vehicle title loans" and "tax refund anticipation loans." The rule:
Limits interest to a 36 percent "military annual percentage rate (MAPR)" that comprises all fees and charges;
Requires that certain oral and written loan disclosures be provided before the issuance of the covered transaction; and
Prohibits or limits certain terms and conditions associated with these types of consumer credit.
FDIC-supervised depository institutions are reminded of other protections afforded to service personnel and their dependents, including:
The Servicemembers Civil Relief Act, which among other things caps the interest rate on credit extensions at six percent during a service member's period of active duty service; and
10 U.S.C. 1044b, which exempts a military power of attorney from state form requirements and gives it the same force as one prepared and executed under state law.
Paper copies of FDIC financial institution letters may be
obtained through the FDIC's Public Information Center, 3501
Fairfax Drive, E-1002, Arlington, VA 22226 (1-877-275-3342
Financial Institution Letters
September 24, 2007
Consumer Protection: Service Members Department of Defense Final Rule on Limitations on Consumer Credit Extended to Service
Members and Dependents (Talent Amendment)
The Department of Defense (DoD) has published the attached final rule stipulating the terms of
certain credit extensions to active duty service members and their dependents ("covered
borrowers"). The rule covers payday loans, motor vehicle title loans, and tax refund anticipation
loans, as defined by DoD, and applies to all persons engaged in the business of extending such
credit and their assignees. For these defined transactions with covered borrowers ("covered
transactions"), the DoD rule:
Limits interest to a 36 percent "military annual percentage rate (MAPR)" that comprises all fees and charges, including those for single premium credit insurance and other ancillary products sold in connection with the transaction; and
Requires that certain oral and written loan disclosures be provided before the issuance of the covered transaction.
The DoD rule provides:
The applicable consumer disclosures;
The method for calculating the MAPR (as opposed to the Truth in Lending Act APR);
The maximum amount and types of fees that may be charged; and
A "safe harbor" for identifying covered borrowers, including a model borrower identification statement that creditors may use.
The DoD rule prohibits:
waiver of legal rights;
unreasonable notice requirements as a condition for legal action;
payment by allotment; and
The rule further limits or restricts:
rollovers and refinancings; and
the use of a check or other method of access to a covered borrower's account.
Creditors offering any covered transactions are subject to criminal and civil penalties if they
violate the rule. Moreover, consumer credit contracts that are not in compliance with the rule
will be deemed void from inception.
The final rule will take effect on October 1, 2007, and will apply to covered transactions that are
consummated on or after that date. All creditors that offer any covered transactions are expected
to be in full compliance by October 1, 2007.
Sandra L. Thompson Director Division of Supervision and Consumer Protection