Complying with the Military Lending Act

When it comes to the Military Lending Act, one the best things you can do is obtain the safe harbor. Financial institutions must verify the status of the applicants by one of two ways: obtaining their status from the DOD's database or pulling a credit bureau report from a nationwide reporting agency.

Here are a few common errors that financial institutions make when obtaining the Safe Harbor.
1. Using a previously obtained credit report that is dated more than 30 days prior to the initiation of the covered transaction.
2. Relying on a previously obtained verification from the DoD website that is dated more than 30 days prior to the initiation of the covered transaction.
3. The borrower applies for a mortgage secured loan and the financial institution obtains a tri-merge credit bureau report that does not check the applicant’s status because mortgage secured loans are not covered loans. Then the borrower switches products to a covered loan. The institution uses the tri-merge credit bureau report for the covered loan without going to the DoD’s website or obtaining a credit bureau report that has the borrower’s status verified.

Remember, the Safe Harbor is there to help protect the financial institution. It only protects you if it is obtained correctly.