Changes to the Military Lending Act (MLA) will have a significant impact on credit union consumer lending, Andrea Stritzke, CUNA Mutual Group’s director of lending compliance, told CUNA Regulatory Compliance School attendees Tuesday in Boston.
Previously, the MLA wasn’t a major concern for credit unions because the rule’s consumer protections applied only to a handful of consumer credit products.
But that changed when the rule was updated this summer.
“You now have to worry about it,” Stritzke said, adding that the new rule:
• Expands the definition of consumer credit;
• Imposes a 36% annual percentage rate cap for consumer credit for servicemembers;
• Amends provisions related to assessing who’s covered under MLA (it's now the credit union’s responsibility); and
• Modifies necessary disclosures.
The big change is the new definition for consumer credit in the MLA.
In the past, the MLA applied only to payday loans, auto title loans, and tax refund anticipation loans.
MLA, which applies to active duty servicemembers and their dependents, now extends to all credit granted for personal, family, or household purposes that is either subject to a finance charge or payable by a written agreement in more than four installments.
The MLA regulation will, however, continue to exclude residential mortgages and credit extended to finance the purchase of personal property (i.e., vehicles).
The rule becomes effective Oct. 1, but compliance will not be mandatory until Oct. 3, 2016.
There are some silver linings in the new rule, Stritzke said, namely:
• The rule provides for a delay of the effective date for applicable credit card accounts until Oct. 3, 2017, giving credit union professionals more time to prepare for changes on those products; and
• The rule will not apply to current loans, and does not impose obligations to monitor the borrower’s covered status for the life of the loan.
“You don’t have to go backward, you just have to go forward,” she said.
CUNA’s Regulatory Compliance School runs Sept. 20-25 in Boston.