The Department of Defense’s December guidance on the Military Lending Act (MLA) has impacted several credit union services, and a recent CUNA CompBlog post examines its effect on indirect dealer lending programs. The post discusses what loans must be in compliance with the MLA rule, and steps credit unions involved in indirect lending should take.
Depending on what is financed, a creditor may find a portion of its loans are exempt from the MLA, while the remainder will require compliance.
Loans that don’t finance GAP or credit insurance and that don’t provide additional cash-out financing that is unrelated to the vehicle’s purchase, are still exempt from the MLA rule.
However, a loan that finances GAP or credit insurance, or provides additional cash out financing that is unrelated to the vehicle’s purchase, will lose its exemption and the creditor must comply with the MLA rule requirements.
Credit unions involved in indirect dealer programs should:
The blog post also addresses confusion stemming from one question in the DOD’s guidance, a question CUNA has requested the DOD remove due to confusion it is causing for credit unions and other lenders.