WASHINGTON (1/2/15)--The Credit Union National Association and other credit union organizations have provided additional information in a supplemental letter to the Department of Defense (DOD) regarding its proposed changes to the Military Lending Act (MLA). The supplemental letter follows up on a joint letter filed last week.
The DOD's proposal would place a 36% cap on the military annual percentage rate (MAPR) of interest for credit products, as well as additional protections.
As part of its proposal, the DOD asked a number of specific questions regarding changes to the definition of "consumer credit," types of exemptions from the proposal and the potentially harmful effects of the proposal on credit unions' ability to offer certain products to servicemembers.
One question asked how the proposal would "affect/curtail your ability to extend credit to our troops and their families." The letter gives several examples of why this would be the case.
"A top concern is that the proposed military annual percentage rate (MAPR) calculation would negatively affect credit unions' ability to extend credit to servicemembers and their families," the supplemental letter reads. "We believe that without a clear definition of all the fees that should and/or must be included, the proposed rule will make accurately calculating the MAPR very difficult."
One credit union cited said the proposal could result in a "compliance nightmare" due to the complicated and potentially subjective nature of MAPR calculations. This can lead to higher compliance costs, and as a result, credit unions choosing to limit products offered.
The letter also advocates against the inclusion of certain fees in the proposal's 36% MAPR calculation. The organizations request the DOD "strongly consider" excluding certain charges from the MAPR calculation, including credit insurance, credit-related ancillary products and other "appropriate exceptions."
The organizations also cite "significant operational concerns" with the MAPR calculations, since credit unions will need to modify systems, compliance and training procedures for their lending programs, as well as costs and time of implementing the requirements to ensure MAPR is not exceeded in any given billing cycle.
The letter also features 12 pages of examples highlighting actions credit unions have taken to serve military communities. It includes 35 examples of small-dollar alternative loan products offered by credit unions operating on DOD installations around the world; 18 credit union programs offered during the sequestration; and 45 credit union programs offered during the 2013 government shutdown.
The supplemental letter was signed by CUNA, African-American Credit Union Coalition, Defense Credit Union Council and National Association of State Credit Union Supervisors.
CUNA and the Defense Council of Credit Unions have also reached out to the Consumer Financial Protection Bureau, which is strongly supporting the proposal. While CUNA is focusing its regulatory advocacy efforts on the DoD, CUNA is aware that the CFPB is coordinating with the DoD regarding the proposal.
CUNA's discussion with the CFPB has focused on the favorable loan products that credit unions provide to servicemembers and their families. CUNA saya s it will continue its advocacy on this proposal, coordinating with the DCUC, and other credit union stakeholders.