In this second installment of the special series on servicemember protections, Chris Willis is joined again by colleagues Taylor Gess and Jeremy Sairsingh to explore how the Military Lending Act (MLA) and the Servicemembers Civil Relief Act (SCRA) impose pricing restrictions that are far more complex than a standard state usury cap, and why that complexity must be accounted for at the product design stage.
The discussion dives into the practical complexity of each statute’s unique definition of interest. The team breaks down how the SCRA’s 6% cap applies to pre-service obligations, which fees count toward that cap, and how the requirement to retroactively reduce and forgive, not defer, interest creates significant system-of-record challenges. They also explain how the MLA’s Military Annual Percentage Rate (MAPR) differs from a traditional Truth in Lending Act/Regulation Z Annual Percentage Rate, what charges must be included in the MAPR calculation, and how the bona fide fee exception for CARD Act credit cards works in practice.
The episode closes with a discussion of the SCRA’s often-overlooked anti-acceleration provision and the regulatory expectation that servicemembers be given the option of a cash refund for forgiven interest rather than automatic principal reduction. Stay tuned for Part 3, which will cover non-pricing protections under these statutes.