If passed, the current 2013 defense authorization bill would increase lending compliance burdens, according to a NAFCU report Thursday.

The bill would grant the Department of Defense authority to subject installment loans to a 36% annual percentage rate cap, and add other regulations per the Military Lending Act.

As currently written, the bill would revise the MLA to include all vehicle title loans and payday loans – open-end and closed-end, regardless of duration – in the law's definition of consumer credit and subject to rate limits and disclosures.

It would also:

• require the Department of Defense to prescribe policy on installment loans (opening the inclusion of more loans in the consumer credit definition);
• clarify a rule that says service members cannot be charged more than is allowed by state law for residents;
• require DoD to consult with financial regulators when prescribing regulation, and once every two years after that; and,
• add civil liability to list of possible MLA penalties, including actual damages, appropriate punitive damages and appropriate equitable or declaratory relief (with a safe harbor for bona fide errors).

Mortgage and auto-loan exemptions are unaffected by current defense measure.

Quincy Enoch, NAFCU's associate director of legislative affairs and military liaison, said that once passed by the Senate, the bill would go to a House-Senate conference that would resolve differences between the above measure and the House-passed bill.