California finance lenders alert: Department of Defense Issues New Guidance on Military Lending Act

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California consumer finance lenders who lend to service members must also comply with the Military Lending Act.    California Finance Lenders Law incorporates the Military Lending Act as follows:

Financial Code 22345. “(a) Any person who violates any provision of Section 670 of the John Warner National Defense Authorization Act for Fiscal Year

2007 (Public Law 109-364) or any provision of Section 232 of Title 32

of the Code of Federal Regulations, as published on August 31, 2007,

in Volume 72 of the Federal Register, violates this chapter.

(b) With respect to any consumer loans covered by Section 670 of

the John Warner National Defense Authorization Act for Fiscal Year

2007 (Public Law 109-364) or by Section 232 of Title 32 of the Code

of Federal Regulations, as published on August 31, 2007, in Volume 72

of the Federal Register, a person that does not market consumer

loans to, or does not extend those loans to, covered borrowers, as

that term is defined under Section 232 of Title 32 of the Code of

Federal Regulations, as published on August 31, 2007, in Volume 72 of

the Federal Register, shall not be in violation of Section 394 of

the Military and Veterans Code.”

The Department of Defense on Aug. 26 published in the Federal Register an interpretive rule governing limitations on terms of consumer credit extended to service members and dependents.

Published under the Military Lending Act, the interpretive rule provides guidance on certain questions the Department received regarding compliance with the July 2015 Final Rule. That rule extended the protections of the Military Lending Act to a broader range of closed-end and open-end credit products, including credit cards, lines of credit, installment loans and deposit advances. The changes are set to take effect in October.

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