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White House Seeks to Roll Back MLA Ruling on GAP, Credit Insurance

By moconnell on 11/6/2018

By Jay Howard Compliance & Administrative Services Manager

The White House is aiming to have a Military Lending Act interpretive ruling from 2017 withdrawn, according to a report by NPR News. Documents obtained by NPR confirm that former undersecretary of personnel and readiness, Robert Wilkie, proposed a rollback of the guidance issued by the Department of Defense last December.

The Department of Defense ruling removed the MLA exemption for retail automobile finance transactions, if the finance transaction included “credit-related products” such as GAP or credit life & disability insurance. Any auto finance transaction with active-duty military personnel or their dependents that includes those products would be subject to the MLA, according to the Department of Defense. As a result, auto dealers and lenders nationwide were subject to an array of restrictions and regulations under the MLA if their military customers wished to purchase GAP or credit insurance.

To further complicate matters, a February report from Hudson Cook attorney Thomas Buiteweg opined that the ruling prohibited the financing of GAP and credit-related products altogether. Several dealers near military bases in Texas have reported that customers are frustrated by the unavailability of the products, and compliance departments at lenders and insurers have few answers to provide.

While dealers, lenders, and product providers have scrambled for solutions, the NADA, GAPA, and various other trade associations were called into action to persuade legislators and Pentagon officials to reconsider the interpretive ruling. Wilkie, who has since been sworn in as secretary of veterans affairs, reportedly advocated for change, going so far as to draft and submit a proposal to the Office of Management and Budget.

Industry analysts are optimistic for a resolution to this turmoil. Wilkie’s change of post, however, leaves his proposal in limbo pending an OMB review, and, without his support, the trade associations will need a new champion in Washington to back the proposal and help bring clarity to this murky issue.

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