CUNA and the Defense Credit Union Council (DCUC) followed up on a February letter to the Department of Defense (DOD), sharing relevant findings from its data collection and offering suggestions the agency can implement to reduce or eliminate the adverse impact the Military Lending Act (MLA) rule is having.
DOD has existing statutory authority to make the changes to the rule suggested in the letter, and CUNA and DCUC encouraged the agency to make the changes via an interim final rule, which would provide for a quicker rulemaking timeframe while also allowing DOD to accept input on the changes.
CUNA analyzed NCUA call report data between 2009 and 2016 of credit unions with significant military membership and found the ratio of personal unsecured loans per member decreased where available data suggested an increase would have occurred.
The research found that while only 47% of non-military credit unions experienced decreases in their portfolios for payday alternative loans (PALs) between the 4th quarter of 2015 and the 4th quarter of 2016, 86% of military credit unions experienced decreases in their portfolios for PALs during this same time period.
CUNA and DCUC believe this indicates “the MLA rule is having an adverse impact on lending to servicemembers as a result of certain provisions of the DOD’s regulation.”
CUNA also solicited data in March via an online survey of lending and compliance personnel.
Based on responses from more than 600 credit union professionals, the survey found the MLA rule is proving burdensome to a majority of credit unions. Almost 60% of respondents stated that the MLA rule is either “very difficult” (15%) or “somewhat difficult” (43%) to comply with.
In addition, roughly 60% of responding credit unions either “moderately” (32%) or “strongly” (27%) believe the MLA rule and accompanying MLA guidance is unclear and needs further clarification.
CUNA and DCUC believe the harm to servicemembers caused by the elimination of PALs can be mitigated by a complete exemption of PALs from the MLA rule.
Finally, the organizations requested DOD issue credit card guidance a minimum of 4 months prior to the effective date of that portion of the MLA rule, currently Oct. 3.
If DOD is unable to issue guidance in this timeframe, CUNA and DCUC urged the department to delay the effective date of the credit card provisions to provide a period of at least 4 months between the date of issuance of the guidance and the effective date.
Additional information can be found on CUNA’s Removing Barriers Blog.