A recent question posed to CUNA compliance staff asked if credit unions are required to disclose the numerical value of the military annual percentage rate (MAPR) to borrowers covered under the Military Lending Act (MLA). Recent changes to the MLA place a number of protections on loans extended to covered military servicemembers.
The final rule prohibits credit unions from imposing an MAPR greater than 36% on a loan to a covered borrower. CUNA has been active in calling for additional guidance to answer compliance questions from the U.S. Department of Defense (DOD), and recently submitted guidance suggestions at the DOD’s request.
For a closed-end loan, the MAPR applies at the time of loan consummation. For open-end loans, the MAPR limit applies for each billing cycle.
The DOD rule requires lenders to provide a statement of the MAPR and a clear description of the payment obligation in writing, on a form for the borrower to keep.
For closed-end loans, a payment schedule fulfills the requirementto disclose the payment obligation, while an account opening disclosure for open-end loans also fulfills it. Credit unions must also provide any disclosure required under Regulation Z, which implements the Truth in Lending Act.
A credit union may satisfy the requirement of providing a “statement of the MAPR” by describing the charges the credit union may impose.
Credit unions are not required to describe the MAPR as a numerical value, or in terms of the total dollar amount of all charges in the MAPR that apply to a specific loan. There is also no requirement to disclose the numerical value of the MAPR to the covered borrower prior to the loan being made, or at any time thereafter.
However, credit unions must be able to calculate the numerical value of the MAPR in order to ensure it doesn’t exceed 36%. This must be done by the credit union prior to consummation for closed-end loans and during each billing cycle for open-end loans.
CUNA’s CompBlog delved into this issue in a recent post. In addition to CompBlog, CUNA’s Compliance Community contains discussion boards and a number of other resources for credit union compliance professionals around the country.