Recently, the Department of Defense (DoD) sent a response to 23 Members of Congress who sent a bipartisan letter urging the repeal of Question and Answer #2 of the December 2017 Military Lending Act (MLA) interpretive guidance. In its letter, the DoD writes that Q&A #2 “does not provide an unlimited exception for financing additional credit for purposes not expressly related to the item being purchased.”
As a reminder, in Q&A #2 the DoD stated that vehicle finance contracts that included Guaranteed Asset Protection (sometimes called a GAP Waiver) or credit insurance, are MLA-covered transactions. The bipartisan Congressional letter stated that Q&A #2 was “… contrary to the statute and the 2015 Implementing Regulations.”
The DoD’s dismissal of legitimate Congressional concerns is, if nothing else, troubling, because as we’ve detailed before, the DoD’s policy on the GAP waiver is based on no data, though there is very clear anecdotal information out there that shows servicemembers and their families continue to struggle financially. This is simply unacceptable.
We agree that our military servicemembers, particularly those recently enlisted out of high school or college, as well as military families, require expanded access to financial education opportunities or financial protections from predatory lenders. But the MLA should also ensure its policies do not have the unintended consequences of placing servicemembers and their families in greater financial jeopardy.
For example, it is disingenuous to suggest, as the DoD’s letter does, that GAP insurance is “not expressly related to the item being purchased.” It is, in fact, directly related to the purchase and protection of the value of the vehicle being purchased. Some service members have faced severe hardship in the past several years have dealt with the fiscal fallout from weather-related destruction. Particularly along the North Carolina coast and Florida Panhandle thousands of vehicles were destroyed, many owned by military personnel and their families. In 2017 Hurricanes Irma and Harvey damaged some one million vehicles, many in areas of heavy military presence.
The DoD’s letter says it “did not create a new rule” and that its interpretive ruling “does not prohibit a creditor from selling, or a covered borrower from purchasing GAP waiver, credit insurance, debt cancellation, or similar products.” But experience shows that servicemembers think otherwise, and did not purchase GAP waivers on their vehicles, which would have covered the difference between the loan amount of the vehicle at purchase and the vehicle value when lost. In 2018 and estimated 5,000 servicemembers incurred about $15 million in losses as a result of DoD’s GAP waiver policy.
AFSA continues to urge the DoD to rescind this interpretative rule, or, at the very least, formally get public comment on its effects so that we can fairly and objectively have a fact-based assessment of the impact of this policy.
DoD’s MLA Rulemaking Should be Fact-based
Jan 08, 2020
Recently, the Department of Defense (DoD) sent a response to 23 Members of Congress who sent a bipartisan letter urging the repeal of Question and Answer #2 of the December 2017 Military Lending Act (MLA) interpretive guidance. In its letter,… Read the rest
Registration is Open for the Independents Conference & Expo!
Jan 08, 2020
 Stan Butler AFSA Independents Section Chairman President & CEO Heights Finance |
Don’t wait for nature to bring the warm weather to you – join us April 28- 30 in Palm Springs, California for the 2020 AFSA Independents Conference |
Electrification, autonomous and rideshare – oh my!
Jan 07, 2020
How are the changing automotive and financial ecosystems transforming auto finance today and in the future?
Join us at the 2020 AFSA Vehicle Finance Conference & Expo as we discuss the impact of vehicle technology, digitization … Read the rest
NBCSL Ratifies Resolution on “Debt Settlement” Companies
Jan 06, 2020
The National Black Caucus of State Legislators (NBCSL) recently ratified a resolution calling on state policymakers to put in place and enforce fundamental consumer protection rules on “debt settlement companies.” You can… Read the rest
AFSA Announces New Members to Board of Directors
Jan 06, 2020
The American Financial Services Association today announced three new members to serve on its Board of Directors:
Jeff Haymore, President & COO, Flagship Credit Acceptance, serves as Flagship’s President and Chief Operating… Read the rest
ICYMI | Himpler Defends Credit Access
Jan 02, 2020
AFSA President & CEO Bill Himpler appeared on Nexstar Television Stations during the holidays in an interview with reporter Kellie Meyer. Their conversation was part of a story on the woefully inaccurately titled “Veterans… Read the rest
“Top 10” Debt Collection Issues in 2020
Dec 27, 2019
Join us on January 22, 2020 for Top Debt Collection Issues in 2020, presented by AFSA.
2020 is shaping up to be a very interesting year in the credit and collection space. The Consumer Financial Protection Bureau hopes to have a final debt collection… Read the rest
AFSA Supports Financial Institution Customer Protection Act
Dec 26, 2019
AFSA last week sent a letter to Senate Banking Committee Chairman Mike Crapo (R-ID) supporting S. 3003, the Financial Institution Customer Protection Act.
The legislation would eliminate Operation Choke Point, a former administration… Read the rest
From The CEOs Desk | Arbitrary Rate Caps Harm Instead of Help
Dec 23, 2019
Last week I had the pleasure of sitting down with reporter Kellie Meyer of Nexstar, a media company with more than 180 local broadcast affiliates across the country. Our conversation was part of a story on the woefully inaccurately titled “Veterans… Read the rest
TRACED Act Passes Senate
Dec 20, 2019
The Senate yesterday passed the Pallone-Thune TRACED Act by unanimous consent. The House passed the bill earlier this month by a vote of 417-3.
The legislation is the result of a bipartisan, bicameral agreement produced by the two bodies, … Read the rest