The Department of Defense (DOD) guidance on changes to the Military Lending Act (MLA), expected to go public Friday, has some key clarifications as requested by CUNA, but does not go as far as it should have.
On the up side, Mike McLain, CUNA’s senior federal compliance counsel, said that one important clarification is that the new MLA rules do not ban the use of statutory lien authority for credit unions. Another is that lenders need only present the payment portion of the loan document during a verbal or written disclosure, not the entire document as the final rule seemed to suggest.
However, McLain pointed out that the guidance left unanswered questions. It does not address what constitutes an ancillary product, leaving open the interpretation of what must be included in APR calculations to remain under the 36% APR ceiling set by the MLA.
"The guidance puts a lot of focus on credit card accounts, and those provisions don't go into effect until October 2017--or late if delayed by the DOD beyond 2017. It would have been preferable for the department to focus more tightly on the rules that go into effect in just five weeks," McLain said.