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Federal Register / Vol. 86, No. 118 / Wednesday, June 23, 2021 / Rules and Regulations Defense has explained that under its implementing regulations, as revised in 2015, consumer credit for purposes of the MLA is, in general, defined consistently with credit that for decades has been subject to the disclosure requirements of the Truth in Lending Act TILA, codified in the Bureaus Regulation Z. 16 However, there are some instances where the definition of consumer credit under the MLA and its implementing regulations is narrower than under TILA.17
One of the MLAs safeguards is a prohibition on imposing interest at a military annual percentage rate MAPR
of greater than 36 percent, where MAPR
is calculated by reference to TILAs annual percentage rate APR, with some specified differences.18 The MLA
also establishes a number of other limitations on the terms of credit transactions, such as a prohibition on rolling over credit under certain circumstances; a prohibition on requiring, as a condition for the extension of credit that, the borrower establish an allotment to repay an obligation; and a prohibition on prepayment penalties or fees.19 The MLA requires disclosures that are based on TILA disclosures with additional supplementary information, such as a statement regarding the MAPR in addition to the disclosure of the TILA
APR.20
Conduct that violates the MLA may also violate TILAs disclosure requirements, or occur concurrently with violations of TILAs disclosure requirements, since the MLAs disclosure requirements incorporate and supplement TILAs. Conduct that violates the MLA may also overlap with violations of the CFPAs prohibition on deceptive acts or practices or other violations of Federal consumer financial law.
Congress provided that any contract prohibited by the MLA is void from the inception of such contract. 21 As the MLAs implementing regulations further explain, any contract with a covered borrower that fails to comply with the MLA or which contains one or more provisions prohibited under the MLA is void from the inception of the contract.22 The MLA also provides criminal penalties for creditors that 16 80

FR 43559, 43560 July 22, 2015.
e.g., 32 CFR 232.3f2 exceptions from definition of consumer credit for purposes of the MLA.
18 10 U.S.C. 987b; 32 CFR 232.4c.
19 10 U.S.C. 987e; 32 CFR 232.8.
20 10 U.S.C. 987c; 32 CFR 232.6.
21 10 U.S.C. 987f3.
22 32 CFR 232.9c.

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knowingly violate the statute.23
However, as originally enacted in 2006, the MLA did not address administrative enforcement.
In 2013, Congress amended the MLA
to provide that it shall be enforced by the agencies specified in section 108 of TILA, in the manner set forth in that section or under any other applicable authorities available to such agencies by law. 24 As the conference report explained, for the purposes of the enforcement authority under this section, a violation of the Military Lending Act would be treated as though it were a violation of the Truth in Lending Act. 25 Thus, the authorities in section 108 of TILA, which are discussed below, are applicable to the MLA.
C. Truth in Lending Act Section 108 addresses administrative enforcement of TILA. It provides that TILA shall be enforced by a list of enforcing agencies, including the applicable prudential regulators and, since 2010, the Bureau.26 In the case of the prudential regulators, section 108
specifies that they shall enforce TILA
under statutory provisions that authorize, among other things, administrative adjudications for ceaseand-desist orders and civil money penalties.27 In the case of the Bureau, section 108 provides that TILA shall be enforced under subtitle E of the CFPA.
Subtitle E authorizes the Bureau to, among other things, conduct administrative adjudications, initiate civil enforcement actions, and send civil investigative demands.28 Section 108
further provides that each of the enforcing agencies may exercise, for the purpose of enforcing compliance with TILA, any other authority conferred on it by law. 29
23 10

U.S.C. 987f1.
Law 112239, sec. 662b, 126 Stat.
1631, 1786 Jan. 2, 2013 adding 10 U.S.C.
987f6. The provision of the MLA concerning criminal penalties is excepted from this authority;
that provision is outside the scope of this interpretive rule. Id. cross-referencing 10 U.S.C.
987f1.
25 H.R. Conf. Rep. No. 112705, at 775 2012.
26 15 U.S.C. 1607a, c, as amended by Public Law 111203, title X, 1100A, 124 Stat. 1376, 210709 2010. The agencies authority to enforce TILA under section 108 is subject to subtitle B
of the CFPA. Id. Subtitle B, among other things, allocates supervisory and enforcement authority between the Bureau and the prudential regulators.
See 12 U.S.C. 551416.
27 15 U.S.C. 1607a1, a2 citing section 8 of the Federal Deposit Insurance Act, 12 U.S.C. 1818, and the Federal Credit Union Act, 12 U.S.C. 1751
et seq..
28 E.g., CFPA sections 105254, 12 U.S.C. 5562
64.
29 15 U.S.C. 1607b.
24 Public
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As general background, since TILAs enactment in 1968, the prudential regulators have relied heavily on bank examinations in order to implement TILA. As noted above, each of the prudential regulators has longstanding statutory authority to examine or conduct examinations of banks or credit unions.30 As the Federal Reserve reported to Congress in 1972, in its capacity as the agency that wrote regulations to implement TILA: For the most part, compliance with TILA is determined by the prudential regulators during the regular periodic examinations of the creditors under their jurisdiction. 31 The Federal Reserve similarly reported to Congress in 1983 that the five prudential regulators enforce compliance with TILA and three other consumer finance statutes mainly through periodic examinations. 32 Along the same lines, the Comptroller of the Currency testified to Congress in 2007 that the primary method that federal banking agencies use to implement consumer protection standards is direct supervisionnot formal enforcement actionsof the banks we supervise. 33
D. History of Bureau Examinations Regarding the MLA
In September 2013, the Bureau amended its short-term, small-dollar lending examination procedures to advise examiners that they should review for MLA violations, which evidence risks to consumers and may require supervisory or enforcement action. 34 This was about two years into the history of the Bureaus examination program and about nine months after the MLA was amended to provide the Bureau with authority to enforce the MLA in the same manner as it is authorized to enforce TILA. As far as the Bureau is aware, no supervised entity ever disputed the propriety of this aspect of the Bureaus examinations by 30 E.g., 12 U.S.C. 248, 325, 481, 1464a, d1Bii, d1Bv, 1756, 1784a, 1819aEighth, 1820b, c, d1.
31 Federal Reserve, Truth in Lending for the Year 1971, reprinted in 118 Cong. Rec. 816, 817 Jan. 24, 1972.
32 Federal Reserve, Annual Report to Congress for 1982 Apr. 1983.
33 Statement by John C. Dugan, Comptroller of the Currency, Before the H. Comm. on Fin. Servcs.
June 13, 2007.
34 CFPB Examination Procedures, Short Term, Small Dollar Lending, at Procedures 11 Sept.
2013, https files.consumerfinance.gov/f/201309_
cfpb_payday_manual_revisions.pdf. These particular procedures are no longer applicable, among other reasons because they do not reflect subsequent revisions to the Department of Defenses regulations implementing the MLA.

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