RICHMOND, Va.—The U.S. Fourth Circuit Court of Appeals has upheld a district court’s dismissal of a class action lawsuit related to the Military Lending Act's (MLA) exception for motor vehicles.
The appeals court affirmed that Guaranteed Auto Protection (GAP) insurance is directly related to the purchase of a vehicle loan and does not fall under the MLA, NAFCU reported.
The plaintiffs in the class action lawsuit argued that including GAP insurance, as well as other fees associated with a vehicle loan, brings the loan outside of the MLA's exception.
In its analysis NAFCU stated, "The MLA rule has an exception for loans that are 'expressly intended to finance the purchase of' a motor vehicle, where the loan is secured by the vehicle being purchased.
‘Confusion Created’
“Some past interpretative rules created some confusion about what it means for a loan to be 'expressly intended' to finance a vehicle purchase," NAFCU added. “In 2020, the Department of Defense (DoD) reverted language for Question No. 2 related to GAP insurance of its MLA interpretive guidance after a revision in 2017 created confusion. NAFCU and the Defense Credit Union Council (DCUC) had pressed the DoD to completely rescind the question.”
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