AFSA Asks for Vendor Access to DMDC Database

On Feb. 10, AFSA sent a letter to the Department of Defense (DoD) asking that Defense Manpower Data Center (DMDC) consider vendors as well as lenders when picking institutions with which to set up a direct connection for purposes of identifying borrowers covered by the Military Lending Act regulations. The DMDC is the central source for identifying, authenticating, authorizing, and providing information on personnel during and after their affiliation with the DoD.

The revisions to the MLA prohibit creditors from extending credit to service members and their dependents at a rate of over 36% all-in annual percentage rate (APR). The “all-in” means that the APR calculation must include all fees from any ancillary products including credit insurance, debt cancellation contracts, and debt suspension agreements. Mortgages and purchase money security interest financing of motor vehicles and personal property are exempt from the prohibition. The amended rules apply to consumer credit transactions entered into or consummated on or after October 3, 2016. Credit cards have until October 3, 2017 to comply.

In order to avoid the severe penalties associated with violating the rules, creditors should check to see if their customers are borrowers covered by the rule. There are three ways a creditor may check a customer’s covered borrower status: (1) entering queries through the Military Lending Act Database, (2) purchasing military status information from one of the three national credit reporting agencies, or (3) a direct connection to the DMDC database.

AFSA’s letter strongly urged the DMDC to allow vendors to access the direct connection. AFSA wrote that granting vendors a direct connection would provide a single access point for multiple financial institutions. The letter stated, “This affords the following advantages to the DMDC: (1) limiting the number of access points, while ensuring database accessibility to a greater number of lenders; (2) less staff time spent on communications with multiple lenders because a single contact at a vendor will suffice for multiple clients; and (3) simplified security due to fewer direct connections.”