WASHINGTON (7/22/15)--The U.S. Department of Defense (DoD) expanded the types of credit products that are covered by a 36% rate cap and other military-specific protections under the Military Lending Act (MLA) through a final rule issued Tuesday.
The rule goes into effect Oct. 1, and compliance is required by Oct. 3, 2016.
"We appreciate that there is a one-year safe harbor period for compliance with this rule," said Elizabeth Eurgubian, CUNA deputy chief advocacy officer. “CUNA strongly supports MLA protections for service members from unscrupulous business practices of organizations targeting our military personnel, but will continue to evaluate the rule as the DoD did not completely exempt credit unions, who have always been dedicated to the financial well-being of their member-owners, from the reach of the regulation."
CUNA also had urged the DOD to work with the National Credit Union Administration to ensure the agency's Payday Alternative Loans (PAL) product can continue to be offered, and are "properly excluded" from the proposal changes.
In its comment on the DoD rule, the NCUA assessed that the final rule will permit military members to continue receiving affordable PALs, which meet NCUA’s regulatory standards for consumer protection. "As a result, credit unions can continue to fully serve the military members who so valiantly serve our nation," NCUA Chair Debbie Matz said.
The final rule announced Tuesday broadens the definition of “consumer credit” from the original narrow parameters under the MLA, which defined “consumer credit” products as:
Under the new definition, the DoD said the term would be "be defined consistently with credit that for decades has been subject to the disclosure requirements of the Truth in Lending Act (TILA), codified in Regulation Z, namely: 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."
The MLA regulation would, however, continue to exclude residential mortgages and credit extended to finance the purchase of, and secured by, personal property, such as vehicle purchase loans.