[Code of Federal Regulations]
[Title 32, Volume 2]
[Revised as of July 1, 2008]
From the U.S. Government Printing Office via GPO Access
[CITE: 32CFR232.8]

[Page 505-506]
 
                       TITLE 32--NATIONAL DEFENSE
 
        CHAPTER I--OFFICE OF THE SECRETARY OF DEFENSE (CONTINUED)
 
PART 232_LIMITATIONS ON TERMS OF CONSUMER CREDIT EXTENDED TO SERVICE MEMBERS 
 
Sec. 232.8  Limitations.

    (a) 10 U.S.C. 987 makes it unlawful for any creditor to extend 
consumer credit to a covered borrower with respect to which:
    (1) The creditor rolls over, renews, repays, refinances, or 
consolidates any

[[Page 506]]

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, unless the new transaction results in more 
favorable terms to the covered borrower, such as a lower MAPR. This part 
shall not apply to a transaction permitted by this paragraph 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 part 
because the consumer was not a covered borrower at the time of the 
original transaction.
    (2) 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. 10 U.S.C. 527 et seq.).
    (3) The creditor requires the covered borrower to submit to 
arbitration or imposes other onerous legal notice provisions in the case 
of a dispute.
    (4) The creditor demands unreasonable notice from the covered 
borrower as a condition for legal action.
    (5) 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 Sec. 232.4(b):
    (i) The creditor may require an electronic fund transfer to repay a 
consumer credit transaction, unless otherwise prohibited by Regulation E 
(Electronic Fund Transfers) 12 CFR part 205;
    (ii) The creditor may require direct deposit of the consumer's 
salary as a condition of eligibility for consumer credit, unless 
otherwise prohibited by law; or
    (iii) The creditor may, 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.
    (6) The creditor requires as a condition for the extension of 
consumer credit that the covered borrower establish an allotment to 
repay the obligation.
    (7) 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.
    (b) For purposes of this section, an assignee may not engage in any 
transaction or take any action that would be prohibited for the 
creditor.