A Department of Defense interpretation of the Military Lending Act issued on December 12, 2017 may significantly impact dealers who sell or who have sold vehicles to members of the military or their dependents. Specifically, the new interpretation primarily impacts the sale of credit-related products such as GAP and credit insurance. The interpretation also impacts cash out financing.
Dealers who sell such products to covered service members or their dependents must fully comply with verbal and written disclosure requirements as well as avoiding a military annual percentage rate that exceeds thirty six percent (36%). A MAPR includes the full cost of such credit related products, as well as certain participation fees, application fees and the traditional finance charge (APR).
Following is a link to an alert that was issued by the National Automobile Dealers Association last month. CLICK HERE
Dealers are advised to carefully review the MLA information and to stay abreast of developments.
NADA and a number of BSM’s dealer clients have worked diligently to open dialogue with the DOD in hopes of securing a change in the interpretation that the credit related products should in fact be subject to the motor vehicle sale exception to the MLA.