WASHINGTON—The National Pawnbrokers Association is suing the Department of Defense over changes to its Military Lending Act rule, asserting, among other things, that the DoD violated the Regulatory Flexibility Act by failing to consider the costs of compliance for small businesses, NAFCU reported.
The pawnbrokers also alleged the DoD violated the Administrative Procedure Act by offering no justification for its new requirement that lenders verify a credit applicant’s status as a covered borrower and because the final rule was neither signed by the Secretary of Defense, the undersecretary or any other authorized officer of the U.S. The final rule was signed by a Federal Register liaison officer at the DoD, NAFCU noted.
The suit, among other things, seeks a preliminary injunction barring the DoD from enforcing or applying the rule against pawn business until it considers the economic impact.
“The DoD revised its MLA rule last year, and it made all provisions except those specific to credit-card accounts effective this Oct. 3. Provisions for credit cards take effect Oct. 3, 2017. The revisions expand the scope of the MLA rule to cover virtually all unsecured lending, subjecting loans to the Military Annual Percentage Rate cap of 36%. MAPR will also include charges for most “add-on” products including various forms of credit insurance and credit-related ancillary products,” NAFCU explained.
NAFCU has urged the DoD to make several revisions to the current rule. It is also advocating an extension of the Oct. 1, 2017, deadline on credit card compliance to Oct. 1, 2018. NAFCU has an extensive collection of online MLA compliance resources available to credit unions.