The Federal Financial Institutions Examination Council (FFIEC) has issued examination procedures for determining compliance with Department of Defense regulations (32 CFR Part 232) under the John Warner National Defense Authorization Act. The DoD regulations provide limitations and requirements for payday loans, vehicle title loans, and tax refund anticipation loans made to active duty service members and their spouses, children, and other dependents.

The rules limit the amount that a creditor can charge, including interest, fees and charges imposed for credit insurance, debt cancellation and suspension, and other credit-related ancillary products sold in connection with the transaction. The combined charges must be expressed as a total dollar amount and as an annualized rate referred to as the “Military Annual Percentage Rate” or “MAPR,” which may not exceed 36 percent.

The examination procedures note that the MAPR includes charges that are not included in the finance charge or APR disclosed under the Truth in Lending Act. The DoD rules also:

• Provide a safe harbor and model form for creditors to use in connection with identifying covered borrowers;
• Require creditors to provide written and oral disclosures in addition to those required by the Truth in Lending Act;
• Prohibit certain loan terms, such as prepayment penalties, mandatory arbitration clauses and unreasonable legal notice requirements; and,
• Restrict loan rollovers and refinancings.