[bmelancon]

Would Attorney Client Loans for a medical/legal purpose be covered under the Military Lending Act? Also, would CD and Savings secured Loans be covered?

Topic

[rcooper]

I’m not exactly sure what type of attorney client transaction you’re talking about. If you can explain it further I’ll offer my opinion.

As for a CD/savings account secured loan, those are not permitted under the MLA effective October 3, 2016. See § 232.8(e):
Title 10 U.S.C. 987 makes it unlawful for any creditor to extend consumer
credit to a covered borrower with respect to which:
The creditor uses a check or other method of access to a deposit, savings, or other financial account maintained by the covered borrower [as collateral], except that, in connection with a consumer credit transaction with an MAPR consistent with § 232.4(b), the creditor may:
•Require an electronic fund transfer to repay a consumer credit transaction, unless otherwise prohibited by law;
•Require direct deposit of the consumer’s salary as a condition of eligibility for consumer credit, unless otherwise prohibited by law; or
•If not otherwise prohibited by applicable law, take a security interest in funds deposited after the extension of credit in an account established in connection with the consumer credit transaction.

[bmelancon]

Our attorney client loans are usually a 2 year single pay note for the individual with the attorney as a guarantor for the loan. Some of these loans have credit life. They are mainly for the purpose of medical or legal bills during the process of a law suit after an accident.

[rcooper]

The loan is consumer purpose, is subject to Reg Z, is presumably being made to a covered borrower and doesn’t meet one of the exceptions, so it would be covered under the MLA.

[newbee05]

Clarification on the CD/Savings Account secured loan. If we are dealing with a covered borrower, the law prohibits the bank from extended a loan secured by a deposit account; however, the MLA does not prohibit the bank from taking a security interest in a deposit account during the term of the loan (I.e. in the event of default). Am I interpreting that correctly?

If not, will you please clarify? In either event, will you please provide a citation that I can reference?

[Author]

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