Unlawful Mandatory Allotment Under The Military Lending Act
Written by Christopher J. Brochu
A mandatory military allotment is disguised to help servicemembers, dependents, and military families. In reality, military families are often exploited through mandatory military allotment. Once a military family registers a creditor/lender with DFAS and allows for military allotment, it becomes extremely difficult to remove, combat unlawful charges and late fees, etc. The department of defense recognized that predatory companies were taking advantage of these military families and it is the reason that MLA prohibits mandatory allotment.
Under the MLA, lenders are prohibited from requiring that servicemembers and their families enroll in military allotments to repay loans. Lenders are taking advantage of the allotment system by attempting to prioritize the repayment of their loans over other expenses. Let’s be honest, banks/lenders/creditors are in the business of making money. Therefore, it comes as no surprise that they want to ensure that their yield on the loan is protected. The MLA is designed to protect servicemembers and their families from this predatory behavior.
While lenders often tout that they offer a variety of repayment options to members of the military, many are telling customers a different story and require repayments by mandatory allotment, in direct violation of the MLA. In 2020, the Consumer Financial Protection Bureau (CFPB) issued a consent order to Omni Financial of Nevada Inc. for violating the MLA. The CFPB found that Omni Financial was providing consumer products to servicemembers and military families and requiring allotment for these military families and mandatory electronic funds transfer for veterans to authorize drafts to cover any missed payment. As a result of Omni’s violation, Omni Financial was required to pay $2.175 in civil penalties, stop their current practices in violation of MLA, and take appropriate measures to prevent similar violations in the future.
Unfortunately, lenders will try to find any way to take advantage of servicemembers, military families, and military dependents. Unlawful mandatory allotments apply to many types of consumer credit and loans covered under MLA, including, but not limited to:
- Payday loans
- Pawn shop loans
- Debt consolidation
- Tax refund anticipation loans
- Credit cards
- Student loans
- Unsecured loans
- Vehicle Title loans (that include things beyond the purchase of a vehicle)
- Some installment loans
If you are a servicemember or military family member or dependent who is currently making payments or premiums by military allotment, your loan may be a direct violation of the MLA.
How does an MLA lawsuit help a servicemember or military family? MLA claims allow a military family to file a lawsuit against a creditor/lender and if the military family is successful, the policy is rescinded to its inception date or the date that you entered into the agreement, any premiums paid, potential statutory and punitive damages, and the predatory lender may be required to pay your attorney’s fees and costs.
Brochu Law, PLLC represents Military Lending Act cases on a contingency fee basis. There is no fee unless you win. We advance all costs on behalf of military families and consumers.
Brochu Law, PLLC represents military families and consumers nationwide*
*Disclaimer –Christopher J. Brochu, Esq. is licensed to practice law in the State of Florida. Brochu Law, PLLC works with co-counsel in accordance with state and federal law.
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