Dealers and lenders are facing significant challenges following the Department of Defense's latest interpretation of the Military Lending Act, but until the DOD clarifies the interpretation, an act that was designed to protect service members may actually be hurting them.
Because of murkiness in the act's changes and its retroactive nature, some lenders and dealers are refusing to sell or fund guaranteed asset protection to members of the military and their dependents. Others are refusing to work with the military altogether until the Defense Department clarifies its interpretation.
The interpretation, citing a 2015 Department of Defense military demographic report, says 44 percent of active service members are 25 years old or younger, and 67 percent of those folks own or lease at least one vehicle.
Tim Meenan, executive director of the Guaranteed Asset Protection Alliance, said his members who frequently provide GAP to active military say that young service members tend to have high levels of negative equity that they roll into their new loans.
"If they don't have GAP, and their car is totaled ... they are not able to pay that down because they don't just owe on the car that was totaled, they owe on the last car," Meenan said. "The harm here is going to fall squarely on the shoulders of enlisted folk."
Military members should have the same opportunities to purchase protection products as civilians, but with an unclear interpretation of the Military Lending Act that could be damaging to dealers and lenders, they don't.
Dealers and lenders are understandably trying to protect their businesses until the Department of Defense clarifies its interpretation. But in the meantime, service members and their dependents are the real victims here.
Some sources are hopeful that the department will address the issue this month, but others predict a resolution during the second quarter at the earliest.
Not only for the sake of dealers and lenders, but for members of the military, let's hope clarification comes soon.