10 U.S.C. § 987 : US Code - Section 987: Terms of consumer credit extended to members and dependents: limitations

Search 10 U.S.C. § 987 : US Code - Section 987: Terms of consumer credit extended to members and dependents: limitations

(a) Interest. - A creditor who extends consumer credit to a
covered member of the armed forces or a dependent of such a member
shall not require the member or dependent to pay interest with
respect to the extension of such credit, except as -
(1) agreed to under the terms of the credit agreement or
promissory note;
(2) authorized by applicable State or Federal law; and
(3) not specifically prohibited by this section.
(b) Annual Percentage Rate. - A creditor described in subsection
(a) may not impose an annual percentage rate of interest greater
than 36 percent with respect to the consumer credit extended to a
covered member or a dependent of a covered member.
(c) Mandatory Loan Disclosures. -
(1) Information required. - With respect to any extension of
consumer credit (including any consumer credit originated or
extended through the internet) to a covered member or a dependent
of a covered member, a creditor shall provide to the member or
dependent the following information orally and in writing before
the issuance of the credit:
(A) A statement of the annual percentage rate of interest
applicable to the extension of credit.
(B) Any disclosures required under the Truth in Lending Act
(15 U.S.C. 1601 et seq.).
(C) A clear description of the payment obligations of the
member or dependent, as applicable.
(2) Terms. - Such disclosures shall be presented in accordance
with terms prescribed by the regulations issued by the Board of
Governors of the Federal Reserve System to implement the Truth in
Lending Act (15 U.S.C. 1601 et seq.).
(d) Preemption. -
(1) Inconsistent laws. - Except as provided in subsection
(f)(2), this section preempts any State or Federal law, rule, or
regulation, including any State usury law, to the extent that
such law, rule, or regulation is inconsistent with this section,
except that this section shall not preempt any such law, rule, or
regulation that provides protection to a covered member or a
dependent of such a member in addition to the protection provided
by this section.
(2) Different treatment under state law of members and
dependents prohibited. - States shall not -
(A) authorize creditors to charge covered members and their
dependents annual percentage rates of interest for loans higher
than the legal limit for residents of the State; or
(B) permit violation or waiver of any State consumer lending
protections for the benefit of residents of the State on the
basis of nonresident or military status of a covered member or
dependent of such a member, regardless of the member's or
dependent's domicile or permanent home of record.
(e) Limitations. - It shall be unlawful for any creditor to
extend consumer credit to a covered member or a dependent of such a
member with respect to which -
(1) the creditor rolls over, renews, repays, refinances, or
consolidates any consumer credit extended to the borrower by the
same creditor with the proceeds of other credit extended to the
same covered member or a dependent;
(2) the borrower is required to waive the borrower's right to
legal recourse under any otherwise applicable provision of State
or Federal law, including any provision of the Servicemembers
Civil Relief Act;
(3) the creditor requires the borrower to submit to arbitration
or imposes onerous legal notice provisions in the case of a
dispute;
(4) the creditor demands unreasonable notice from the borrower
as a condition for legal action;
(5) the creditor uses a check or other method of access to a
deposit, savings, or other financial account maintained by the
borrower, or the title of a vehicle as security for the
obligation;
(6) the creditor requires as a condition for the extension of
credit that the borrower establish an allotment to repay an
obligation; or
(7) the borrower is prohibited from prepaying the loan or is
charged a penalty or fee for prepaying all or part of the loan.
(f) Penalties and Remedies. -
(1) Misdemeanor. - A creditor who knowingly violates this
section shall be fined as provided in title 18, or imprisoned for
not more than one year, or both.
(2) Preservation of other remedies. - The remedies and rights
provided under this section are in addition to and do not
preclude any remedy otherwise available under law to the person
claiming relief under this section, including any award for
consequential and punitive damages.
(3) Contract void. - Any credit agreement, promissory note, or
other contract prohibited under this section is void from the
inception of such contract.
(4) Arbitration. - Notwithstanding section 2 of title 9, or any
other Federal or State law, rule, or regulation, no agreement to
arbitrate any dispute involving the extension of consumer credit
shall be enforceable against any covered member or dependent of
such a member, or any person who was a covered member or
dependent of that member when the agreement was made.
(g) Servicemembers Civil Relief Act Protections Unaffected. -
Nothing in this section may be construed to limit or otherwise
affect the applicability of section 207 of the Servicemembers Civil
Relief Act (50 U.S.C. App. 527).
(h) Regulations. - (1) The Secretary of Defense shall prescribe
regulations to carry out this section.
(2) Such regulations shall establish the following:
(A) Disclosures required of any creditor that extends consumer
credit to a covered member or dependent of such a member.
(B) The method for calculating the applicable annual percentage
rate of interest on such obligations, in accordance with the
limit established under this section.
(C) A maximum allowable amount of all fees, and the types of
fees, associated with any such extension of credit, to be
expressed and disclosed to the borrower as a total amount and as
a percentage of the principal amount of the obligation, at the
time at which the transaction is entered into.
(D) Definitions of "creditor" under paragraph (5) and "consumer
credit" under paragraph (6) of subsection (i), consistent with
the provisions of this section.
(E) Such other criteria or limitations as the Secretary of
Defense determines appropriate, consistent with the provisions of
this section.
(3) In prescribing regulations under this subsection, the
Secretary of Defense shall consult with the following:
(A) The Federal Trade Commission.
(B) The Board of Governors of the Federal Reserve System.
(C) The Office of the Comptroller of the Currency.
(D) The Federal Deposit Insurance Corporation.
(E) The Office of Thrift Supervision.
(F) The National Credit Union Administration.
(G) The Treasury Department.
(i) Definitions. - In this section:
(1) Covered member. - The term "covered member" means a member
of the armed forces who is -
(A) on active duty under a call or order that does not
specify a period of 30 days or less; or
(B) on active Guard and Reserve Duty.
(2) Dependent. - The term "dependent", with respect to a
covered member, means -
(A) the member's spouse;
(B) the member's child (as defined in section 101(4) of title
38); or
(C) an individual for whom the member provided more than one-
half of the individual's support for 180 days immediately
preceding an extension of consumer credit covered by this
section.
(3) Interest. - The term "interest" includes all cost elements
associated with the extension of credit, including fees, service
charges, renewal charges, credit insurance premiums, any
ancillary product sold with any extension of credit to a
servicemember or the servicemember's dependent, as applicable,
and any other charge or premium with respect to the extension of
consumer credit.
(4) Annual percentage rate. - The term "annual percentage rate"
has the same meaning as in section 107 of the Truth and Lending
Act (15 U.S.C. 1606), as implemented by regulations of the Board
of Governors of the Federal Reserve System. For purposes of this
section, such term includes all fees and charges, including
charges and fees for single premium credit insurance and other
ancillary products sold in connection with the credit
transaction, and such fees and charges shall be included in the
calculation of the annual percentage rate.
(5) Creditor. - The term "creditor" means a person -
(A) who -
(i) is engaged in the business of extending consumer
credit; and
(ii) meets such additional criteria as are specified for
such purpose in regulations prescribed under this section; or
(B) who is an assignee of a person described in subparagraph
(A) with respect to any consumer credit extended.
(6) Consumer credit. - The term "consumer credit" has the
meaning provided for such term in regulations prescribed under
this section, except that such term does not include (A) a
residential mortgage, or (B) a loan procured in the course of
purchasing a car or other personal property, when that loan is
offered for the express purpose of financing the purchase and is
secured by the car or personal property procured.