2/21/2024 0 Comments Hybrid loan arrangement æ··åˆ![]() The underlying case involved an active duty servicemember, Jerry Davidson, who purchased a car at a Virginia dealership, which he financed through a loan from United Auto Credit Corporation. Accordingly, while a loan to finance the purchase of a car is clearly not “consumer credit” and therefore excluded from MLA coverage, the parties in Davidson sought clarity as to whether financing something in addition to a car purchase – here, GAP coverage – rendered the exclusion inapplicable. The dispute in Davidson involved the MLA’s definition of “consumer credit.” Under the MLA, the term “consumer credit” specifically excludes “(A) a residential mortgage, or (B) a loan procured in the course of purchasing a car or other personal property, when that loan is offered for the express purpose of financing the purchase and is secured by the car or personal property procured.” 10 U.S.C. ![]() While the decision is only binding in the Fourth Circuit, it provides a degree of clarity – for now – as to the MLA’s coverage of such hybrid loans, an issue that has been the subject of mixed messages from federal regulators over the past several years. United Auto Credit Corporation includes a vigorous dissent, which argues that the majority ignored the Congressional intent behind the MLA in arriving at their decision. Court of Appeals for the Fourth Circuit in Davidson v. In a highly anticipated decision regarding the treatment of Guaranteed Asset Protection (“GAP”) under the Military Lending Act (“MLA”), a federal appellate court has ruled that a hybrid loan that finances GAP coverage along with a motor vehicle purchase is exempt from the MLA’s restrictions.
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