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I have written a few times about Annual Percentage Rate (APR) and the role it plays in consumer finance disclosures.  I explained here how the calculation of APR depends upon how interest is computed. And, I briefly discussed the role of APR under the Military Lending Act.  This APR is commonly known as the “All-In” or Military APR.  

Basically, there is a limitation of 36% in the financing of non-purchase money and residential real estate loans to members of the military and their dependents—but this 36% computation includes ancillary charges relating to the transaction. 

The following are the ancillary charges that are included in the computation of APR for the purposes of determining the All-In or Military APR:

• 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; 
• Any fee for a credit-related ancillary product sold in connection with the credit transaction for closed-end creditor an account for open-end credit;
• The amount of the Finance charges associated with the consumer credit;
• With certain exceptions as to credit unions and banks, any application fee charged to a covered borrower who applies for consumer credit;
• Any fee imposed for participation in any plan or arrangement for consumer credit, subject to one section of the Department of Defense regulation; and
• Any fee for a credit-related ancillary product sold in connection with the credit transaction for closed-end creditor an account for open-end credit.

The net result of including the items above in the computation is that the amount of actual Finance Charge (interest) that comprises the All-In APR must be lower to accommodate any ancillary charges and keep the computation below the 36% restriction.

The adoption of the Military APR occurred in 2015 and became effective in 2016. Since that time, there has been a push in some states and in some committees in Congress to adopt the All-In APR for all consumers—not just active duty military and their dependents.  Despite the fact that small dollar loans cannot be profitably made at rates under 36%, the All-In APR concept continues to gain traction in some legislatures and among consumer advocates.