Military Leave Act Arbitration Process: Clarification
The recent issue of our FADA January E-News contained an article regarding the
Military Leave Act Arbitration Process
which broadly stated "
that the inclusion of an arbitration provision in a contract executed by a covered member as part of an extension of credit would be deemed void...
" FADA would like members to note,
this would only apply to those covered members who also had credit related products, such as GAP, financed on the RISC
The DoD’s guidance on this matter is below (82 FR 58739):
2. Does credit that a creditor extends for the purpose of purchasing a motor vehicle or personal property, which secures the credit, fall within the exception to “consumer credit” under 32 CFR 232.3(f)(2)(ii) or (iii) where the creditor simultaneously extends credit in an amount greater than the purchase price of the motor vehicle or personal property?
Answer: The answer will depend on what the credit beyond the purchase price of the motor vehicle or personal property is used to finance. Generally, financing costs related to the object securing the credit will not disqualify the transaction from the exceptions, but financing credit-related costs will disqualify the transaction from the exceptions…A credit transaction that finances the object itself, as well as any costs expressly related to that object, is covered by the exceptions in § 232.3(f)(2)(ii) and (iii), provided it does not also finance any credit-related product or service.
For example, a credit transaction that finances the purchase of a motor vehicle (and is secured by that vehicle), and also finances optional leather seats within that vehicle and an extended warranty for service of that vehicle is eligible for the exception under § 232.3(f)(2)(ii)
. (emphasis added)…
In contrast, a credit transaction that also finances a credit-related product or service rather than a product or service expressly related to the motor vehicle or personal property is not eligible for the exceptions under
§ 232.3(f)(2)(ii) and (iii)
For example, a credit transaction that includes financing for Guaranteed Auto Protection insurance or a credit insurance premium would not qualify for the exception under
§ 232.3(f)(2)(ii) or (iii)
If you have any questions, or need any further clarification on this matter, please contact our office at
or (850) 224-1466
, and we will be happy to assist.