CUNA continues push to DOD for MLA clarity, changes

May 20, 2016

CUNA continues its push on the U.S. Department of Defense (DOD) for guidance and possible revisions to the Military Lending Act (MLA). CUNA sent several potential revisions to the MLA to the DOD, which asked CUNA to submit guidance suggestions last month.

The DOD finalized changes to the MLA last year, adding a number of protections on loans extended to covered military servicemembers. Covered loans to borrowers cannot exceed a 36% military annual percentage rate (MAPR).

In the letter, CUNA Deputy Chief Advocacy Officer Elizabeth Eurgubian asked for an update on the status of additional changes to the MLA, as well as the status of the development of compliance guidance. CUNA urged the DOD to develop the guidance in coordination with the NCUA, Consumer Financial Protection Bureau (CFPB) and other federal financial regulators.

CUNA also asked the DOD to consider the following substantive changes to the MLA rule, in order to lessen the likelihood of harm to servicemembers resulting from the rule’s unintended consequences:

  • Exempt the NCUA’s Payday Alternative Loan (PAL) program. The DOD has already provided an exclusion in the rule for certain application fees from the calculation of MAPR, but CUNA believes it does not go nearly far enough; and
  • Exclude certain charges from the MAPR calculation, including those for credit insurance, credit-related ancillary products and other appropriate exceptions to provide parity with the APR calculation under the CFPB’s Regulation Z.

CUNA also expressed strong opposition to the drastic changes to the process by which creditors determine whether a consumer is a covered borrower. These would require creditors to access the Defense Manpower Data Center (DMDC).

“We strongly oppose shifting the burden to the creditor, especially in light of the potential liability this exposes the creditor to, which in turn could jeopardize or reduce the availability of credit to servicemembers,” the letter reads. “In addition, requiring creditors to access the DMDC database is likely to present technological and other operational challenges, particularly if the database is for some reason inaccessible.”

CUNA also attached to its letter the list of specific credit union questions it raised in a March meeting with the DOD.