Department of Defense Military Payday Lending Act or

John Warner National Defense Authorization Act for Fiscal Year 2007

Ø           Regulations generally effective October 1, 2007

Ø           Applies to all creditors making consumer loans to “covered borrowers”. 

Ø           Intended to regulate the terms of consumer credit extended by creditors to active duty service members and their dependents.

Ø           Requires oral and written disclosures

Ø           Requires a 36% rate cap called a MAPR

Ø           Prohibitions and/or restrictions on refinances and renewals by the same creditor

Ø           Prohibits mandatory arbitration

Ø           Prohibits creditor demands for certain notices from borrowers

Ø           Prohibits creditor use of vehicle titles as security

Ø           Prohibits prepayment penalties or fees

Ø           Violators would be subject to criminal prosecution

Ø           Contracts in violation of the proposed regulation would be void.

Be Aware that the Department of Defense Defines Payday Loan as:

Ø           Closed-end credit with a term of 91 days or less, and

Ø           The amount financed does not exceed $2,000, and

Ø           The covered borrower provides the lender with a person check (payment instrument) to hold for more than one day or authorizes an electronic fund transfer after one or more days.