[krlay]

Are overdraft lines of credit covered only if they apply for the line of credit during active duty? What if they had an overdraft line of credit prior to active duty and it was a zero balance but became active duty and had to use the line of credit to cover overdrafts?

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[rcooper]

Based on the “applicability” of the rule, I agree that the coverage would apply to overdraft lines of credit est. during active duty.

(a)(1) Applicability. This part applies to consumer credit extended by a creditor to a covered borrower, as those terms are defined in this part. Nothing in this part applies to a credit transaction or account relating to a consumer who is not a covered
borrower at the time he or she becomes obligated on a credit transaction or establishes an account for credit. Nothing in this part applies to a credit transaction or account relating to a consumer (which otherwise would be consumer credit) when the consumer no longer is a covered borrower.

Pages 43579-80 of the final rule have some discussion of overdraft lines of credit: https://www.gpo.gov/fdsys/pkg/FR-2015-07-22/pdf/2015-17480.pdf.

[rcooper]

A couple of other points to clarify, if the overdraft line of credit was established prior to active duty status then the bank wouldn’t have a covered borrower and the MLA provisions wouldn’t apply. But keep in mind that SCRA limitation of 6% on the interest rate would apply to obligations established prior to active duty status, including an overdraft line of credit.

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