Defense Authorization provision would delay MLA changes

April 29, 2015

WASHINGTON (4/29/15)--A provision added to the National Defense Authorization Act (NDAA) would delay implementation of changes to certain rules under the Military Lending Act (MLA), until a report on the effects of those changes on servicemembers is prepared.

Rep. Mac Thornberry (R-Texas), chair of the U.S. House Armed Services Committee, released a version of the NDAA this week with the provision.

The provision comes as the Department of Defense (DOD) announced last year a proposed overhaul of the MLA, which would cap annual percentage rate of interests, as well as install several consumer protections.

CUNA, in its comment letter on the proposal, urged the DOD to exempt credit unions from the proposal, saying it could affect the abilities of credit unions to deliver high-quality, reasonably priced products to servicemembers.

In addition, in its letter, CUNA strongly opposed a provision in the proposal that would drastically change the process for determining whether a potential borrower is covered under the MLA protections. Specifically, the proposed change would require lenders to verify the status of a potential borrower by accessing the DOD's Defense Manpower Data Center database in order to be eligible for the rule's safe harbor.

Thornberry's provision would require the Secretary of Defense to, not later than March 1, 2016, deliver a report to the Senate and House Armed Services Committees.

The report must contain, among other things, a look at the impact the proposal would have on military readiness, if any, outlining the impact that has resulted from servicemembers and families accessing products such as payday loans, vehicle title loans, deposit advances and installment loans.

The provision also stipulates that no final MLA regulation can be implemented by the Secretary of Defense in the 60 days following the submission of the report to Congress.