Per DOD request, CUNA submits MLA guidance suggestions

April 11, 2016

WASHINGTON (4/11/16)--The Credit Union National Association (CUNA) responded to a U.S. Department of Defense (DOD) request for guidance language on changes to the Military Lending Act (MLA) regulation last week. CUNA, which raised a number of concerns during a March meeting with the DOD, also signed onto a joint letter with other trade organizations last week recommending clarifications and modifications.

The DOD finalized changes to the MLA regulation in July 2015, extending 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).

Compliance with the changes is mandatory by Oct. 3.

In meeting with the DOD last month, CUNA was the only participant to provide a document listing credit union compliance questions and issues. The DOD followed up with CUNA, requesting language for potential guidance for MLA implementation.

In its separate letter, CUNA’s guidance suggestions include:

  • Defining ancillary products more specifically, as any product other than credit insurance, a debt cancellation contract, or a debt suspension agreement, that could have a direct impact on the covered loan balance;
  • Allowing lenders to, prior to establishing an open-end account, describe only the interest rate, payment amount and payment frequency, instead of the current language that requires the entire document to be disclosed aloud; and
  • Exempting credit unions from the requirement that creditors can only take a security interest in an account opened in conjunction with the loan and only in deposits made after the loan is established. If the DOD cannot exempt credit unions, CUNA presented five paragraphs that define when and how an account can be established to meet the rule requirements.

CUNA’s joint letter outlines additional suggestions and solutions for various issues in the final rule's language.

Those include:

  • Adding language that would allow a covered borrower to make a payment or a creditor to accept a payment from a check or other method of access to an account maintained by the covered borrower;
  • Allowing creditors to provide information to borrowers though mail, phone or fax; and
  • Allowing creditors to impose a one-time application fee.

The joint letter was also signed by the American Bankers Association, American Financial Services Association, Association of Military Banks of America, Consumer Bankers Association, Independent Community Bankers of American, National Association of Federal Credit Unions and the Financial Services Roundtable.