[LWiley]

Our Bank is looking at a debit rewards program that, in addition to higher rewards points issued based on level selected, there will also be additional services offered. There are three levels (basic is free and then two more for additional fees). The highest level card includes the ability to receive a small dollar short term loan against their unused overdraft protection limit.

Would the Military Lending Act apply? The MLA says that overdrafts are not covered, but wouldn’t a loan against an unfunded overdraft protection limit apply if the repayment period was longer than 4 installments? And would the fee charged monthly for the rewards program need to be considered in the MAPR calculation?

[rcooper]

This sounds like a deposit advance loan. They are discussed on P. 43579 of the federal register linked here.

Most, if not all, ‘‘deposit advance’’
products would (when offered to a
covered borrower) be covered as
consumer credit because this type of
product typically involves credit
extended by a creditor primarily for
personal, family, or household purposes
for which the borrower pays any fee or
charge that is, or is expected to be,
repaid from funds available in the
borrower’s asset account held by that
creditor.

I believe the fee associated with the loan would be included in the MAPR.

[Author]

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