32 C.F.R. Part 232: Limitations on Terms of Consumer Credit Extended to Service Members and Dependents

2026 Kansas Consumer & Mortgage Lending Law Book ______________________________________________________________________________ DOD Regulations Outline DEPARTMENT OF DEFENSE REGULATIONS 32 C.F.R. Part 232 Limitations on Terms of Consumer Credit Extended to Service Members and Dependents
232.1 Authority, purpose, and coverage.
232.2 Applicability; examples.
232.3 Definitions.
232.4 Terms of consumer credit extended to covered borrowers.
232.5 Optional identification of covered borrower.
232.6 Mandatory loan disclosures.
232.7 Preemption.
232.8 Limitations.
232.9 Penalties and remedies.
232.10 Administrative enforcement.
232.11 Servicemembers Civil Relief Act protections unaffected.
232.12 Effective dates.
232.13 Compliance dates.

2026 Kansas Consumer & Mortgage Lending Law Book ______________________________________________________________________________ DOD Regulations – Page 1 DEPARTMENT OF DEFENSE REGULATIONS 32 C.F.R. Part 232 Limitations on Terms of Consumer Credit Extended to Service Members and Dependents (Authorized by 10 U.S.C. § 987; Created by 80 FR 43606, effective July 22, 2015) § 232.1 Authority, purpose, and coverage. (a) Authority. This part is issued by the Department of Defense to implement 10 U.S.C. 987. (b) Purpose. The purpose of this part is to impose limitations on the cost and terms of certain extensions of credit to Service members and their dependents, and to provide additional protections relating to such transactions in accordance with 10 U.S.C. 987. (c) Coverage. This part defines the types of transactions involving “consumer credit,” a “creditor,” and a “covered borrower” that are subject to the regulation, consistent with the provisions of 10 U.S.C. 987. In addition, this part:
(1) Provides the maximum allowable amount of all charges, and the types of charges, that may be associated with a covered extension of consumer credit; (2) Requires a creditor to provide to a covered borrower a statement of the Military Annual Percentage Rate, or MAPR, before or at the time the borrower becomes obligated on the transaction or establishes an account for the consumer credit. The statement required by § 232.6(a)(1) differs from and is in addition to the disclosures that must be provided to consumers under the Truth in Lending Act; (3) Provides for the method a creditor must use in calculating the MAPR; and (4) Contains such other criteria and limitations as the Secretary of Defense has determined appropriate, consistent with the provisions of 10 U.S.C. 987. § 232.2 Applicability; examples. (a) (1) Applicability. This part applies to consumer credit extended by a creditor to a covered borrower, as those terms are defined in this part. Nothing in this part applies to a credit transaction or account relating to a consumer who is not a covered borrower at the time he or she becomes obligated on a credit transaction or establishes an account for credit. Nothing in this part applies to a credit transaction or account relating to a consumer (which otherwise would be consumer credit) when the consumer no longer is a covered borrower. (2) Examples—

2026 Kansas Consumer & Mortgage Lending Law Book ______________________________________________________________________________ DOD Regulations – Page 2 (i) Covered borrower. Consumer A is a member of the armed forces but not serving on active duty, and holds an account for closed-end credit with a financial institution. After establishing the closed-end credit account, Consumer A is ordered to serve on active duty, thereby becoming a covered borrower, and soon thereafter separately establishes an open-end line of credit for personal purposes (which is not subject to any exception or temporary exemption) with the financial institution. This part applies to the open-end line of credit, but not to the closed-end credit account. (ii) Not a covered borrower. Same facts as described in paragraph (a)(2)(i) of this section. One year after establishing the open-end line of credit, Consumer A ceases to serve on active duty. This part never did apply to the closed-end credit account, and because Consumer A no longer is a covered borrower, this part no longer applies to the open-end line of credit. (b) Examples. The examples in this part are not exclusive. To the extent that an example in this part implicates a term or provision of Regulation Z (12 CFR part 1026), issued by the Consumer Financial Protection Bureau to implement the Truth in Lending Act, Regulation Z shall control the meaning of that term or provision. § 232.3 Definitions. As used in this part:
(a) Affiliate means any person that controls, is controlled by, or is under common control with another person. (b) Billing cycle has the same meaning as “billing cycle” in Regulation Z. (c) Bureau means the Consumer Financial Protection Bureau. (d) Closed-end credit means consumer credit (but for the conditions applicable to consumer credit under this part) other than consumer credit that is “open-end credit” as that term is defined in Regulation Z. (e) Consumer means a natural person. (f) (1) Consumer credit means credit offered or extended to a covered borrower primarily for personal, family, or household purposes, and that is:
(i) Subject to a finance charge; or
(ii) Payable by a written agreement in more than four installments. (2) Exceptions. Notwithstanding paragraph (f)(1) of this section, consumer credit does not mean:

2026 Kansas Consumer & Mortgage Lending Law Book ______________________________________________________________________________ DOD Regulations – Page 3 (i) A residential mortgage, which is any credit transaction secured by an interest in a dwelling, including a transaction to finance the purchase or initial construction of the dwelling, any refinance transaction, home equity loan or line of credit, or reverse mortgage; (ii) Any credit transaction that is expressly intended to finance the purchase of a motor vehicle when the credit is secured by the vehicle being purchased; (iii) Any credit transaction that is expressly intended to finance the purchase of personal property when the credit is secured by the property being purchased; (iv) Any credit transaction that is an exempt transaction for the purposes of Regulation Z (other than a transaction exempt under 12 CFR 1026.29) or otherwise is not subject to disclosure requirements under Regulation Z; and (v) Any credit transaction or account for credit for which a creditor determines that a consumer is not a covered borrower by using a method and by complying with the recordkeeping requirement set forth in § 232.5(b). (g) (1) Covered borrower means a consumer who, at the time the consumer becomes obligated on a consumer credit transaction or establishes an account for consumer credit, is a covered member (as defined in paragraph (g)(2) of this section) or a dependent (as defined in paragraph (g)(3) of this section) of a covered member. (2) The term “covered member” means a member of the armed forces who is serving on— (i) Active duty pursuant to title 10, title 14, or title 32, United States Code, under a call or order that does not specify a period of 30 days or fewer; or (ii) Active Guard and Reserve duty, as that term is defined in 10 U.S.C. 101(d)(6). (3) The term “dependent” with respect to a covered member means a person described in subparagraph (A), (D), (E), or (I) of 10 U.S.C. 1072(2). (4) Notwithstanding paragraph (g)(1) of this section, covered borrower does not mean a consumer who (though a covered borrower at the time he or she became obligated on a consumer credit transaction or established an account for consumer credit) no longer is a covered member (as defined in paragraph (g)(2) of this section) or a dependent (as defined in paragraph (g)(2) of this section) of a covered member. (h) Credit means the right granted to a consumer by a creditor to defer payment of debt or to incur debt and defer its payment. (i) Creditor, except as provided in § 232.8(a), (f), and (g), means a person who is:
(1) Engaged in the business of extending consumer credit; or

2026 Kansas Consumer & Mortgage Lending Law Book ______________________________________________________________________________ DOD Regulations – Page 4 (2) An assignee of a person described in paragraph (i)(1) of this section with respect to any consumer credit extended. (3) For the purposes of this definition, a creditor is engaged in the business of extending consumer credit if the creditor considered by itself and together with its affiliates meets the transaction standard for a “creditor” under Regulation Z with respect to extensions of consumer credit to covered borrowers. (j) Department means the Department of Defense. (k) Dwelling means a residential structure that contains one to four units, whether or not the structure is attached to real property. The term includes an individual condominium unit, cooperative unit, mobile home, and manufactured home. (l) Electronic fund transfer has the same meaning as in the regulation issued by the Bureau to implement the Electronic Fund Transfer Act, as amended from time to time (12 CFR part 1005). (m) Federal credit union has the same meaning as “Federal credit union” in the Federal Credit Union Act (12 U.S.C. 1752(1)). (n) Finance charge has the same meaning as “finance charge” in Regulation Z. (o) Insured depository institution has the same meaning as “insured depository institution” in the Federal Deposit Insurance Act (12 U.S.C. 1813(c)). (p) Military annual percentage rate (MAPR). The MAPR is the cost of the consumer credit expressed as an annual rate, and shall be calculated in accordance with § 232.4(c). (q) Open-end credit means consumer credit that (but for the conditions applicable to consumer credit under this part) is “open-end credit” under Regulation Z. (r) Person means a natural person or organization, including any corporation, partnership, proprietorship, association, cooperative, estate, trust, or government unit. (s) Regulation Z means any rules, or interpretations thereof, issued by the Bureau to implement the Truth in Lending Act, as amended from time to time, including any interpretation or approval issued by an official or employee duly authorized by the Bureau to issue such interpretations or approvals. However, for any provision of this part requiring a creditor to comply with Regulation Z, a creditor who is subject to Regulation Z (12 CFR part 226) issued by the Board of Governors of the Federal Reserve System must continue to comply with 12 CFR part 226. Words that are not defined in this part have the same meanings given to them in Regulation Z (12 CFR part 1026) issued by the Bureau, as amended from time to time, including any interpretation thereof by the Bureau or an official or employee of the Bureau duly authorized by the Bureau to issue such interpretations. Words that are not defined in this part or Regulation Z, or any interpretation thereof, have the meanings given to them by State or Federal law.

2026 Kansas Consumer & Mortgage Lending Law Book ______________________________________________________________________________ DOD Regulations – Page 5 (t) Short-term, small amount loan means a closed-end loan that is— (1) Subject to and made in accordance with a Federal law (other than 10 U.S.C. 987) that expressly limits the rate of interest that a Federal credit union or an insured depository institution may charge on an extension of credit, provided that the limitation set forth in that law is comparable to a limitation of an annual percentage rate of interest of 36 percent; and (2) Made in accordance with the requirements, terms, and conditions of a rule, prescribed by the appropriate Federal regulatory agency (or jointly by such agencies), that implements the Federal law described in paragraph (t)(1) of this
section, provided further that such law or rule contains—
(i) A fixed numerical limit on the maximum maturity term, which term shall not exceed 9 months; and (ii) A fixed numerical limit on any application fee that may be charged to a consumer who applies for such closed-end loan. § 232.4 Terms of consumer credit extended to covered borrowers. (a) General conditions. A creditor who extends consumer credit to a covered borrower may not require the covered borrower to pay an MAPR for the credit with respect to such extension of credit, except as:
(1) Agreed to under the terms of the credit agreement or promissory note; (2) Authorized by applicable State or Federal law; and (3) Not specifically prohibited by this part. (b) Limit on cost of consumer credit. A creditor may not impose an MAPR greater than 36 percent in connection with an extension of consumer credit that is closed-end credit or in any billing cycle for open-end credit. (c) Calculation of the MAPR.— (1) Charges included in the MAPR. The charges for the MAPR shall include, as applicable to the extension of consumer credit:
(i) Any credit insurance premium or fee, any charge for single premium credit insurance, any fee for a debt cancellation contract, or any fee for a debt suspension agreement; (ii) Any fee for a credit-related ancillary product sold in connection with the credit transaction for closed-end credit or an account for open-end credit; and

2026 Kansas Consumer & Mortgage Lending Law Book ______________________________________________________________________________ DOD Regulations – Page 6 (iii) Except for a bona fide fee (other than a periodic rate) which may be excluded under paragraph (d) of this section:
(A) Finance charges associated with the consumer credit; (B) Any application fee charged to a covered borrower who applies for consumer credit, other than an application fee charged by a Federal credit union or an insured depository institution when making a short-term, small amount loan, provided that the application fee is charged to the covered borrower not more than once in any rolling 12-month period; and (C) Any fee imposed for participation in any plan or arrangement for consumer credit, subject to paragraph (c)(2)(ii)(B) of this section. (iv) Certain exclusions of Regulation Z inapplicable. Any charge set forth in paragraphs (c)(1)(i) through (iii) of this section shall be included in the calculation of the MAPR even if that charge would be excluded from the finance charge under Regulation Z. (2) Computing the MAPR— (i) Closed-end credit. For closed-end credit, the MAPR shall be calculated following the rules for calculating and disclosing the “Annual Percentage Rate (APR)” for credit transactions under Regulation Z based on the charges set forth in paragraph (c)(1) of this section. (ii) Open-end credit— (A) In general. Except as provided in paragraph (c)(2)(ii)(B) of this
section, for open-end credit, the MAPR shall be calculated
following the rules for calculating the effective annual percentage rate for a billing cycle as set forth in § 1026.14(c) and (d) of Regulation Z (as if a creditor must comply with that section) based on the charges set forth in paragraph (c)(1) of this section. Notwithstanding § 1026.14(c) and (d) of Regulation Z, the amount of charges related to opening, renewing, or continuing an account must be included in the calculation of the MAPR to the extent those charges are set forth in paragraph (c)(1) of this section. (B) No balance during a billing cycle. For open-end credit, if the MAPR cannot be calculated in a billing cycle because there is no balance in the billing cycle, a creditor may not impose any fee or charge during that billing cycle, except that the creditor may impose a fee for participation in any plan or arrangement for that open-end credit so long as the participation fee does not exceed $100 per annum, regardless of the billing cycle in which the participation fee is

2026 Kansas Consumer & Mortgage Lending Law Book ______________________________________________________________________________ DOD Regulations – Page 7 imposed; provided, however, that the $100-per annum limitation on the amount of the participation fee does not apply to a bona fide participation fee imposed in accordance with paragraph (d) of this
section.
(d) Bona fide fee charged to a credit card account— (1) In general. For consumer credit extended in a credit card account under an open￾end (not home-secured) consumer credit plan, a bona fide fee, other than a periodic rate, is not a charge required to be included in the MAPR pursuant to paragraph (c)(1) of this section. The exclusion provided for any bona fide fee under this paragraph (d) applies only to the extent that the charge by the creditor is a bona fide fee, and must be reasonable for that type of fee. (2) Ineligible items. The exclusion for bona fide fees in paragraph (d)(1) of this section does not apply to— (i) Any credit insurance premium or fee, including any charge for single premium credit insurance, any fee for a debt cancellation contract, or any fee for a debt suspension agreement; or (ii) Any fee for a credit-related ancillary product sold in connection with the credit transaction for closed-end credit or an account for open-end credit. (3) Standards relating to bona fide fees – (i) Like-kind fees. To assess whether a bona fide fee is reasonable under paragraph (d)(1) of this section, the fee must be compared to fees typically imposed by other creditors for the same or a substantially similar product or service. For example, when assessing a bona fide cash advance fee, that fee must be compared to fees charged by other creditors for transactions in which consumers receive extensions of credit in the form of cash or its equivalent. Conversely, when assessing a foreign transaction fee, that fee may not be compared to a cash advance fee because the foreign transaction fee involves the service of exchanging the consumer's currency (e.g., a reserve currency) for the local currency demanded by a merchant for a good or service, and does not involve the provision of cash to the consumer. (ii) Safe harbor. A bona fide fee is reasonable under paragraph (d)(1) of this
section if the amount of the fee is less than or equal to an average amount
of a fee for the same or a substantially similar product or service charged by 5 or more creditors each of whose U.S. credit cards in force is at least $3 billion in an outstanding balance (or at least $3 billion in loans on U.S. credit card accounts initially extended by the creditor) at any time during the 3- year period preceding the time such average is computed.

2026 Kansas Consumer & Mortgage Lending Law Book ______________________________________________________________________________ DOD Regulations – Page 8 (iii) Reasonable fee. A bona fide fee that is higher than an average amount, as calculated under paragraph (d)(3)(ii) of this section, also may be reasonable under paragraph (d)(1) of this section depending on other factors relating to the credit card account. A bona fide fee charged by a creditor is not unreasonable solely because other creditors do not charge a fee for the same or a substantially similar product or service. (iv) Indicia of reasonableness for a participation fee. An amount of a bona fide fee for participation in a credit card account may be reasonable under paragraph (d)(1) of this section if that amount reasonably corresponds to the credit limit in effect or credit made available when the fee is imposed, to the services offered under the credit card account, or to other factors relating to the credit card account. For example, even if other creditors typically charge $100 per annum for participation in credit card accounts, a $400 fee nevertheless may be reasonable if (relative to other accounts carrying participation fees) the credit made available to the covered borrower is significantly higher or additional services or other benefits are offered under that account. (4) Effect of charging fees on bona fide fees— (i) Bona fide fees treated separately from charges for credit insurance products or credit-related ancillary products. If a creditor imposes a fee described in paragraph (c)(1) of this section and imposes a finance charge to a covered borrower, the total amount of the fee(s) and finance charge(s) shall be included in the MAPR pursuant to paragraph (c) of this section, and the imposition of any fee or finance charge described in paragraph (c)(1) of this
section shall not affect whether another type of fee may be excluded as a
bona fide fee under this paragraph (d).
(ii) Effect of charges for non-bona fide fees. If a creditor imposes any fee (other than a periodic rate or a fee that must be included in the MAPR pursuant to paragraph (c)(1) of this section) that is not a bona fide fee and imposes a finance charge to a covered borrower, the total amount of those fees, including any bona fide fees, and other finance charges shall be included in the MAPR pursuant to paragraph (c) of this section. (iii) Examples. (A) In a credit card account under an open-end (not home-secured) consumer credit plan during a given billing cycle, Creditor A imposes on a covered borrower a fee for a debt cancellation product (as described in paragraph (c)(1)(i) of this section), a finance charge (as described in paragraph (c)(1)(iii)(A)), and a bona fide foreign transaction fee that qualifies for the exclusion under this paragraph (d). Only the fee for the debt cancellation product and the finance charge must be included when calculating the MAPR.

2026 Kansas Consumer & Mortgage Lending Law Book ______________________________________________________________________________ DOD Regulations – Page 9 (B) In a credit card account under an open-end (not home-secured) consumer credit plan during a given billing cycle, Creditor B imposes on a covered borrower a fee for a debt cancellation product (as described in paragraph (c)(1)(i) of this section), a finance charge (as described in paragraph (c)(1)(iii)(A)), a bona fide foreign transaction fee that qualifies for the exclusion under this paragraph (d), and a bona fide, but unreasonable cash advance fee. All of the fees—including the foreign transaction fee that otherwise would qualify for the exclusion under this paragraph (d)—and the finance charge must be included when calculating the MAPR. (5) Rule of construction. Nothing in paragraph (d)(1) of this section authorizes the imposition of fees or charges otherwise prohibited by this part or by other applicable State or Federal law. § 232.5 Optional identification of covered borrower. (a) No restriction on method for covered-borrower check. A creditor is permitted to apply its own method to assess whether a consumer is a covered borrower. (b) Safe harbor— (1) In general. A creditor may conclusively determine whether credit is offered or extended to a covered borrower, and thus may be subject to 10 U.S.C. 987 and the requirements of this part, by assessing the status of a consumer in accordance with this paragraph (b). (2) Methods to check status of consumer— (i) Department database— (A) In general. To determine whether a consumer is a covered borrower, a creditor may verify the status of a consumer by using information relating to that consumer, if any, obtained directly or indirectly from the database maintained by the Department, available at https://www.dmdc.osd.mil/mla/welcome.xhtml. A search of the Department's database requires the entry of the consumer's last name, date of birth, and Social Security number. (B) Historic lookback prohibited. At any time after a consumer has entered into a transaction or established an account involving an extension of credit, a creditor (including an assignee) may not, directly or indirectly, obtain any information from any database maintained by the Department to ascertain whether a consumer had been a covered borrower as of the date of that transaction or as of the date that account was established.

2026 Kansas Consumer & Mortgage Lending Law Book ______________________________________________________________________________ DOD Regulations – Page 10 (ii) Consumer report from a nationwide consumer reporting agency. To determine whether a consumer is a covered borrower, a creditor may verify the status of a consumer by using a statement, code, or similar indicator describing that status, if any, contained in a consumer report obtained from a consumer reporting agency that compiles and maintains files on consumers on a nationwide basis, or a reseller of such a consumer report (as each of those terms is defined in the Fair Credit Reporting Act (15 U.S.C. 1681a) and any implementing regulation (12 CFR part 1022)). (3) Determination and recordkeeping; one-time determination permitted. A creditor who makes a determination regarding the status of a consumer by using one or both of the methods set forth in paragraph (b)(2) of this section shall be deemed to be conclusive with respect to that transaction or account involving consumer credit between the creditor and that consumer, so long as that creditor timely creates and thereafter maintains a record of the information so obtained. A creditor may make the determination described in this paragraph (b), and keep the record of that information obtained at that time, solely at the time— (i) A consumer initiates the transaction or 30 days prior to that time; (ii) A consumer applies to establish the account or 30 days prior to that time; or (iii) The creditor develops or processes, with respect to a consumer, a firm offer of credit that (among the criteria used by the creditor for the offer) includes the status of the consumer as a covered borrower, so long as the consumer responds to that offer not later than 60 days after the time that the creditor had provided that offer to the consumer. If the consumer responds to the creditor's offer later than 60 days after the time that the creditor had provided that offer to the consumer, then the creditor may not rely upon its initial determination in developing or processing that offer, and, instead, may act on the consumer's response as if the consumer is initiating the transaction or applying to establish the account (as described in paragraph (b)(3)(i) or (ii) of this section). § 232.6 Mandatory loan disclosures. (a) Required information. With respect to any extension of consumer credit (including any consumer credit originated or extended through the internet) to a covered borrower, a creditor shall provide to the covered borrower the following information before or at the time the borrower becomes obligated on the transaction or establishes an account for the consumer credit:
(1) A statement of the MAPR applicable to the extension of consumer credit; (2) Any disclosure required by Regulation Z, which shall be provided only in accordance with the requirements of Regulation Z that apply to that disclosure; and

2026 Kansas Consumer & Mortgage Lending Law Book ______________________________________________________________________________ DOD Regulations – Page 11 (3) A clear description of the payment obligation of the covered borrower, as applicable. A payment schedule (in the case of closed-end credit) or account￾opening disclosure (in the case of open-end credit) provided pursuant to paragraph (a)(2) of this section satisfies this requirement. (b) One-time delivery; multiple creditors. (1) The information described in paragraphs (a)(1) and (a)(3) of this section are not required to be provided to a covered borrower more than once for the transaction or the account established for consumer credit with respect to that borrower. (2) Multiple creditors. If a transaction involves more than one creditor, then only one of those creditors must provide the disclosures in accordance with this section. The creditors may agree among themselves which creditor may provide the information described in paragraphs (a)(1) and (a)(3) of this section. (c) Statement of the MAPR— (1) In general. A creditor may satisfy the requirement of paragraph (a)(1) of this section by describing the charges the creditor may impose, in accordance with this part and subject to the terms and conditions of the agreement, relating to the consumer credit to calculate the MAPR. Paragraph (a)(1) of this section shall not be construed as requiring a creditor to describe the MAPR as a numerical value or to describe the total dollar amount of all charges in the MAPR that apply to the extension of consumer credit. (2) Method of providing a statement regarding the MAPR. A creditor may include a statement of the MAPR applicable to the consumer credit in the agreement with the covered borrower involving the consumer credit transaction. Paragraph (a)(1) of this section shall not be construed as requiring a creditor to include a statement of the MAPR applicable to an extension of consumer credit in any advertisement relating to the credit. (3) Model statement. A statement substantially similar to the following statement may be used for the purpose of paragraph (a)(1) of this section: “Federal law provides important protections to members of the Armed Forces and their dependents relating to extensions of consumer credit. In general, the cost of consumer credit to a member of the Armed Forces and his or her dependent may not exceed an annual percentage rate of 36 percent. This rate must include, as applicable to the credit transaction or account: The costs associated with credit insurance premiums; fees for ancillary products sold in connection with the credit transaction; any application fee charged (other than certain application fees for specified credit transactions or accounts); and any participation fee charged (other than certain participation fees for a credit card account).” (d) Methods of delivery—

2026 Kansas Consumer & Mortgage Lending Law Book ______________________________________________________________________________ DOD Regulations – Page 12 (1) Written disclosures. The creditor shall provide the information required by paragraphs (a)(1) and (3) of this section in writing in a form the covered borrower can keep. (2) Oral disclosures. (i) In general. The creditor also shall orally provide the information required by paragraphs (a)(1) and (3) of this section. (ii) Methods to provide oral disclosures. A creditor may satisfy the requirement in paragraph (d)(2)(i) of this section if the creditor provides— (A) The information to the covered borrower in person; or (B) A toll-free telephone number in order to deliver the oral disclosures to a covered borrower when the covered borrower contacts the creditor for this purpose. (iii) Toll-free telephone number on application or disclosure. If applicable, the toll-free telephone number must be included on— (A) A form the creditor directs the consumer to use to apply for the transaction or account involving consumer credit; or (B) A written disclosure the creditor provides to the covered borrower, pursuant to paragraph (d)(1) of this section. (e) When disclosures are required for refinancing or renewal of covered loan. The refinancing or renewal of consumer credit requires new disclosures under this section only when the transaction for that credit would be considered a new transaction that requires disclosures under Regulation Z. § 232.7 Preemption. (a) Inconsistent laws. 10 U.S.C. 987 as implemented by this part preempts any State or Federal law, rule or regulation, including any State usury law, to the extent such law, rule or regulation is inconsistent with this part, except that any such law, rule or regulation is not preempted by this part to the extent that it provides protection to a covered borrower greater than those protections provided by 10 U.S.C. 987 and this part. (b) Different treatment under State law of covered borrowers is prohibited. A State may not:
(1) Authorize creditors to charge covered borrowers rates of interest for any consumer credit or loans that are higher than the legal limit for residents of the State, or (2) Permit the violation or waiver of any State consumer lending protection covering consumer credit that is for the benefit of residents of the State on the basis of the

2026 Kansas Consumer & Mortgage Lending Law Book ______________________________________________________________________________ DOD Regulations – Page 13 covered borrower's nonresident or military status, regardless of the covered borrower's domicile or permanent home of record, provided that the protection would otherwise apply to the covered borrower. § 232.8 Limitations. Title 10 U.S.C. 987 makes it unlawful for any creditor to extend consumer credit to a covered borrower with respect to which:
(a) The creditor rolls over, renews, repays, refinances, or consolidates any consumer credit extended to the covered borrower by the same creditor with the proceeds of other consumer credit extended by that creditor to the same covered borrower. This paragraph shall not apply to a transaction when the same creditor extends consumer credit to a covered borrower to refinance or renew an extension of credit that was not covered by this paragraph because the consumer was not a covered borrower at the time of the original transaction. For the purposes of this paragraph, the term “creditor” means a person engaged in the business of extending consumer credit subject to applicable law to engage in deferred presentment transactions or similar payday loan transactions (as described in the relevant law), provided however, that the term does not include a person that is chartered or licensed under Federal or State law as a bank, savings association, or credit union. (b) The covered borrower is required to waive the covered borrower's right to legal recourse under any otherwise applicable provision of State or Federal law, including any provision of the Servicemembers Civil Relief Act (50 U.S.C. App. 501 et seq.). (c) The creditor requires the covered borrower to submit to arbitration or imposes other onerous legal notice provisions in the case of a dispute. (d) The creditor demands unreasonable notice from the covered borrower as a condition for legal action. (e) The creditor uses a check or other method of access to a deposit, savings, or other financial account maintained by the covered borrower, except that, in connection with a consumer credit transaction with an MAPR consistent with § 232.4(b), the creditor may:
(1) Require an electronic fund transfer to repay a consumer credit transaction, unless otherwise prohibited by law; (2) Require direct deposit of the consumer's salary as a condition of eligibility for consumer credit, unless otherwise prohibited by law; or (3) If not otherwise prohibited by applicable law, take a security interest in funds deposited after the extension of credit in an account established in connection with the consumer credit transaction.

2026 Kansas Consumer & Mortgage Lending Law Book ______________________________________________________________________________ DOD Regulations – Page 14 (f) The creditor uses the title of a vehicle as security for the obligation involving the consumer credit, provided however, that for the purposes of this paragraph, the term “creditor” does not include a person that is chartered or licensed under Federal or State law as a bank, savings association, or credit union. (g) The creditor requires as a condition for the extension of consumer credit that the covered borrower establish an allotment to repay the obligation. For the purposes of this paragraph only, the term “creditor” shall not include a “military welfare society,” as defined in 10 U.S.C. 1033(b)(2), or a “service relief society,” as defined in 37 U.S.C. 1007(h)(4). (h) The covered borrower is prohibited from prepaying the consumer credit or is charged a penalty fee for prepaying all or part of the consumer credit. § 232.9 Penalties and remedies. (a) Misdemeanor. A creditor who knowingly violates 10 U.S.C. 987 as implemented by this
part shall be fined as provided in title 18, United States Code, or imprisoned for not more
than one year, or both.
(b) Preservation of other remedies. The remedies and rights provided under 10 U.S.C. 987 as implemented by this part are in addition to and do not preclude any remedy otherwise available under State or Federal law or regulation to the person claiming relief under the statute, including any award for consequential damages and punitive damages. (c) Contract void. Any credit agreement, promissory note, or other contract with a covered borrower that fails to comply with 10 U.S.C. 987 as implemented by this part or which contains one or more provisions prohibited under 10 U.S.C. 987 as implemented by this
part is void from the inception of the contract.
(d) Arbitration. Notwithstanding 9 U.S.C. 2, or any other Federal or State law, rule, or regulation, no agreement to arbitrate any dispute involving the extension of consumer credit to a covered borrower pursuant to this part shall be enforceable against any covered borrower, or any person who was a covered borrower when the agreement was made. (e) Civil liability— (1) In general. A person who violates 10 U.S.C. 987 as implemented by this part with respect to any person is civilly liable to such person for:
(i) Any actual damage sustained as a result, but not less than $500 for each violation; (ii) Appropriate punitive damages; (iii) Appropriate equitable or declaratory relief; and

2026 Kansas Consumer & Mortgage Lending Law Book ______________________________________________________________________________ DOD Regulations – Page 15 (iv) Any other relief provided by law. (2) Costs of the action. In any successful action to enforce the civil liability described in paragraph (e)(1) of this section, the person who violated 10 U.S.C. 987 as implemented by this part is also liable for the costs of the action, together with reasonable attorney fees as determined by the court. (3) Effect of finding of bad faith and harassment. In any successful action by a defendant under this section, if the court finds the action was brought in bad faith and for the purpose of harassment, the plaintiff is liable for the attorney fees of the defendant as determined by the court to be reasonable in relation to the work expended and costs incurred. (4) Defenses. A person may not be held liable for civil liability under paragraph (e) of this section if the person shows by a preponderance of evidence that the violation was not intentional and resulted from a bona fide error notwithstanding the maintenance of procedures reasonably adapted to avoid any such error. Examples of a bona fide error include clerical, calculation, computer malfunction and programming, and printing errors, except that an error of legal judgment with respect to a person's obligations under 10 U.S.C. 987 as implemented by this part is not a bona fide error. (5) Jurisdiction, venue, and statute of limitations. An action for civil liability under paragraph (e) of this section may be brought in any appropriate United States district court, without regard to the amount in controversy, or in any other court of competent jurisdiction, not later than the earlier of:
(i) Two years after the date of discovery by the plaintiff of the violation that is the basis for such liability; or (ii) Five years after the date on which the violation that is the basis for such liability occurs. § 232.10 Administrative enforcement. The provisions of this part, other than § 232.9(a), shall be enforced by the agencies specified in
section 108 of the Truth in Lending Act (15 U.S.C. 1607) in the manner set forth in that section or
under any other applicable authorities available to such agencies by law. § 232.11 Servicemembers Civil Relief Act protections unaffected. Nothing in this part may be construed to limit or otherwise affect the applicability of section 207 and any other provisions of the Servicemembers Civil Relief Act (50 U.S.C. App. 527).

2026 Kansas Consumer & Mortgage Lending Law Book ______________________________________________________________________________ DOD Regulations – Page 16 § 232.12 Effective dates. (a) In general. This regulation shall take effect October 1, 2015, except that, other than as provided in this section and in § 232.13(b)(1), nothing in this part shall apply to consumer credit that is extended to a covered borrower and consummated before October 3, 2016. (b) Prior extensions of consumer credit. Consumer credit that is extended to a covered borrower and consummated any time between October 1, 2007, and October 3, 2016, is subject to the definitions, conditions, and requirements of this part as were established by the Department and effective on October 1, 2007. (c) New extensions of consumer credit. Except as provided in paragraphs (d) and (e) of this
section with respect to extensions of consumer credit under paragraph (b) of this section
(and except as permitted by § 232.13(b)(1)), the requirements of this part that are effective as of October 1, 2015, shall apply only to a consumer credit transaction or account for consumer credit consummated or established on or after October 3, 2016. (d) Provisions of 10 U.S.C. 987(d)(2). The amendments to 10 U.S.C. 987(d)(2) enacted in
section 661(a) of the National Defense Authorization Act for Fiscal Year 2013
(Pub. L. 112-239, 126 Stat. 1785), as reflected in § 232.7(b), took effect on January 2, 2014. (e) Civil liability remedies. The provisions set forth in § 232.9(e) shall apply with respect to consumer credit extended on or after January 2, 2013. § 232.13 Compliance dates. (a) In general. Except as provided in paragraph (c) of this section, a creditor must comply with the requirements of this part, as may be applicable, with respect to a consumer credit transaction or account for consumer credit consummated or established on or after October 3, 2016, not later than that date. (b) Safe harbors for identifying a covered borrower— (1) New safe harbors. Section 232.5 shall apply October 3, 2016. (2) Prior safe harbor valid until general compliance date. The provisions relating to the identification of a covered borrower set forth in § 232.5(a) of the regulation established by the Department and effective on October 1, 2007 (including the interpretation by the Department that provides an exception from the safe harbor for the creditor's knowledge that the applicant is a covered borrower) shall remain in effect until October 3, 2016. (c) Limited exemption for credit card account; reservation of authority—

2026 Kansas Consumer & Mortgage Lending Law Book ______________________________________________________________________________ DOD Regulations – Page 17 (1) In general. Notwithstanding § 232.3(f)(1) and subject to paragraph (c)(2) of this
section, until October 3, 2017, consumer credit does not mean credit extended in a
credit card account under an open-end (not home-secured) consumer credit plan. (2) Authority to issue an order to extend exemption. The Secretary, or an official of the Department duly authorized by the Secretary, may, by order, extend the expiration of the exemption set forth in paragraph (c)(1) of this section, until a date not later than October 3, 2018.