WASHINGTON (1/26/15)--Credit unions should be exempt from proposed changes to the Military Lending Act (MLA), Credit Union National Association and Defense Credit Union Council (DCUC) staff told federal regulators Friday.
The meeting was with staff from the Consumer Financial Protection Bureau (CFPB), which is working in close collaboration with the Department of Defense (DOD) to finalize the proposal.
The changes would amend the MLA to place a 36% cap on the annual percentage rate (APR) of interest charged by credit products covered by the regulation, which includes credit cards. It would also require creditors to provide additional disclosures and consumer protections.
CUNA is concerned that the regulation would hamper credit unions' ability to extend credit to servicemembers and expressed concerns in its December comment letter on the proposal. This was followed by a supplemental comment letter earlier this month.
CUNA and the DCUC noted during the meeting that credit unions are not part of the problem that the proposed changes are meant to address--predatory lenders that alter products to skirt MLA requirements, which is what the proposed changes intend to combat. Therefore credit unions should not fall under the proposed rule changes.
CUNA also urged the CFPB to work with the DOD to ensure the proposed changes will not adversely affect credit unions' ability to make Payday Alternative Loans (PALs), which is a program created by the National Credit Union Administration.
NCUA Chair Debbie Matz previously expressed concerns that the PAL program would be affected by the new regulation and sent her own letter to the DOD, asking for PALs to be exempt from the proposal.
During the meeting, CUNA also expressed reservations about the proposed changes to the process by which creditors determine whether a consumer is a "covered borrower" using the Defense Manpower Data Center database, should the DOD not exempt credit unions from the proposal.