A resolution on the Military Lending Act is long overdue.
More than a year after a Pentagon ruling on the MLA made financing guaranteed asset protection to service members unviable, military members, car dealers and lenders are still awaiting an amendment that would once again allow members of the military to buy GAP from dealerships and protect themselves from losses. (In the event of a total loss, GAP covers the difference between a damaged car's insured value and the loan or lease balance.)
Some consumer groups support the updated MLA interpretation, saying that some dealers pocket the money for GAP and never activate the policy, and that GAP insurance is available to service members for a lower price through insurance companies. Dealers and industry groups argue that GAP waivers offered through dealerships include more extensive coverage than what insurers provide.
The Pentagon issued its December 2017 ruling without a notice or comment period, perhaps because it was an interpretation of a regulation, rather than a new regulation.
A resolution was expected in May 2018. Ten months have gone by. And in the meantime, the exposure to heavy losses has only grown.
Industry insiders have said that government officials are aware of the issue, and last year, at least one member of Congress aimed to help resolve it. But progress has been stymied by changing personnel in Washington. Service members shouldn't have to suffer at the hand of a high-turnover government.
If the Pentagon's process had included a notice and comment period, it might have, say, capped the price of GAP waivers sold by dealerships rather than all but barring their sale.
Military members should be protected from unethical dealerships; laws that protect them from overpaying or ending up in overwhelming debt are beneficial. But this sweeping interpretation can put them at serious financial risk. A traditional rule-making process could have spared them this risk.
The National Automobile Dealers Association, the American Financial Services Association, other industry groups and state dealer associations are ramping up their efforts to get the interpretation reversed.
Let's hope the Pentagon is listening — and acts fast.