Frequently Asked Questions: Compliance with the Military Lending Act

Mark Campanale Government Relations, Legislative Updates & Alerts

Updated November 23, 2021 

We’re here with answers to NPA members’ recent questions on Military Lending Act (MLA) compliance!  

1. How do we determine whether a pawn customer is a “covered borrower” eligible for the maximum 36% Military Lending Act Annual Percentage?  

Pawnbrokers may use any reasonable means to determine whether a pawn customer is an active-duty service member or a dependent of one. The “check-the-box” is a method many pawnbrokers use. However, any “check-the-box” method does not qualify you for the “safe harbor” from liability to regulators or customers.  

No pawn customer self-certification qualifies – even if a false statement may expose the customer to prosecution under state law. 

The MLA regulation provides the means to qualify for the “safe harbor” by searching the Defense Department’s Defense Manpower Data Center (DMDC) database that contains information on all active-duty service members and eligible dependents at https://mla.dmdc.osd.mil We know the DMDC database is difficult to access, but our messages to the administrators about the problems pawnbrokers are experiencing have thus far not been heard.  

Remember to keep records about which of your pawn customers are “covered borrowers” for five years after the date of the pawn. 

2. What disclosures am I required to give MLA-covered borrowers? 

  • A verbal disclosure of the “Military Annual Percentage Rate” (MAPR) before the transaction, which is the same figure as the APR for pawn transactions. 
  • A separate written disclosure of the MAPR to the customer that is either on the pawn ticket or a separate document.  And 
  • A written disclosure of the APR in the TILA disclosures you make for all customers. 

3. Do pawnbrokers need to use a different pawn ticket for MLA-covered borrowers?  

This depends on what your regular pawn ticket includes. If you have an arbitration clause in your regular pawn ticket, you need a separate version of the pawn ticket for MLA-covered borrowers. The MLA prohibits including arbitration clauses or other waivers of consumers’ rights under State or Federal Law.  

The NPA recommends that you consult with your local lawyer about compliance with the Military Lending Act.  This set of FAQs is not intended as, and should not be used as, a substitute for guidance from your local lawyer. 

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