WASHINGTON (3/16/16)--The Credit Union National Association (CUNA) continues its broad advocacy efforts to secure substantive compliance guidance for credit unions regarding changes to the Military Lending Act (MLA).
In its latest action, CUNA was the only participant to provide a document with a list of credit union compliance concerns to a Listening Session coordinated Tuesday by the U.S. Department of Defense (DOD). The session also included representatives from the National Credit Union Administration (NCUA), Consumer Financial Protection Bureau, Federal Reserve Board, and the Federal Trade Commission.
The NCUA shared MLA guidance last month with credit unions. While CUNA appreciates that the NCUA document provides a useful, complete summary of the rule, CUNA is adamant that credit unions need answers to the far-reaching concerns CUNA shared if they are to meet an Oct. 3 compliance deadline.
CUNA’s regulatory advocacy and compliance staff have worked closely together since the changes were finalized last year to highlight essential information credit unions need in order to comply with the rule.
The changes to the MLA were finalized in July 2015, and CUNA followed up with a final rule analysis. They extend the definition of “consumer credit” for military servicemembers to a much broader range of open- and closed-end products, beyond the traditionally included categories of payday loans, vehicle title loans and refund anticipation loans. Covered loans to borrowers cannot exceed a 36% military annual percentage rate (MAPR).
“Simply put, credit unions need more clarifications on this rule so they can continue to serve their military members,” said Elizabeth Eurgubian, CUNA’s deputy chief advocacy officer. “This is a phenomenally complex ruleand dedicated guidance on these changesis needed to ensure that military members get the services and protections they deserve.”
During the Tuesday session, and in previous meetings and calls with the DOD, CUNA raised questions about how the MAPR will be computed, which is necessary for credit unions to know well before the Oct. 3 compliance deadline.
“Credit unions calculate APR through their core processing systems, and therefore are heavily reliant on their vendors to make the correct calculations,” said Jared Ihrig, CUNA’s chief compliance officer, repeating an exchange he had with DOD staff during the meeting. “We need guidance sooner rather than later, because without it vendors don’t know how to adjust their systems, which makes it extremely difficult to ensure compliance with the rule. This would give credit unions no choice but to remove products and services geared toward servicemembers, and we don't want that.”
It can take vendors that handle consumer loans, such as the ones covered under MLA, an extended time to implement changes to a calculation.
CUNA also remains concerned about a section of the MLA that permits a creditor to take a security interest only in funds deposited after the extension of credit and in an account established in connection with the loan.
Clarity is needed for this section, CUNA maintains, particularly on the definition of “an account established in connection with” the extension of credit. CUNA’s CompBlog goes deeper into this issue in a December post.
Some of the concerns CUNA shared in its document include:
Ihrig, Eurgubian, Mike McLain, CUNA’s senior federal compliance counsel, and Luke Martone, CUNA’s senior director of advocacy, attended the session with the DOD.