Military Lending Act and Safe Harbor

The Department of Defense’s (DOD) final rule (amending the implementing regulations of the Military Lending Act of 2006) expands specific protections provided to service members and their families. Financial institutions and other creditors must comply with the rule by October 3, 2016.

October 3, 2016 may seem like a long way off; however, your financial institution should consider all implications and you may need to make a decision before that time in order to comply with changes that become effective on that day. Part of the Act mandates that financial institutions determine if a consumer is a covered borrower under the regulation. A creditor is permitted to apply its own method to assess whether the consumer is covered under the regulation; however, after February 15, 2016 there will only be two options that would provide a safe harbor for your institution.  

The DOD has offered methods in which financial institutions may be granted “safe harbor” when complying with the verification of a borrower’s status for coverage under the Military Lending Act.

Options for Safe Harbor

The first option provided by the DOD is queries through the Defense Manpower Data Center’s (DMDC) website. This could be either for individual or batch queries. This option will require the financial institution to create an account via the DMDC website. In addition, it requires the financial institution to upload the information, which may take up to 24 hours to obtain a response.

The second option is to utilize one of the three national credit reporting agencies. However, this option may be more costly to the financial institution and may not provide the most up to date information on your query. 


In order to allay potential regulator criticism, documentation will be crucial, regardless of the option chosen; the financial institution should keep all pertinent information provided by the source used. Financial institutions may also decide to use one or both avenues to show compliance with the safe harbor standard. 

Your institution should consider obtaining certification for all loan applicant’s in October to show compliance with the new standards. 

Notwithstanding the above-mentioned options, financial institutions may also use other methods to determine whether customers are part of the DOD database; however, it could not rely upon the protections of the safe harbor defense.