CUNA requests 6-month delay for MLA Oct. 3 effective date

August 31, 2016

CUNA wrote to the U.S. Department of Defense (DOD) Tuesday requesting at least a 6-month delay in the Oct. 3 effective date for changes to the Military Lending Act (MLA) rule. CUNA has pushed the DOD for guidance related to the changes, which was released last week, but CUNA still questions whether financial institutions can be fully prepared.

“While some credit union core processors have indicated they expect to be ready by Oct. 3, given remaining ambiguities in the rule, we question whether it’s possible for any financial services processors to be fully prepared,” the letter reads. “Such ambiguities aside, it is likely that some lenders will be unable to comply with the regulation by the effective date.”

The changes to the MLA regulation add a number of requirements to loans extended to covered military servicemembers.

“This compliance struggle will harm not only the lenders themselves but, more importantly, it has the potential of harming servicemembers that may be unable to obtain credit due to lenders’ compliance challenges,” the letter adds.

CUNA believes that it is wholly within the DOD’s statutory authority to delay the effective date.

In the event the DOD chooses not to delay the effective date, CUNA urged the agency to adopt a 6-month safe harbor for lenders working to comply with the rule but are unable to do so by Oct. 3.

“The safe harbor should permit such lenders to continue operating--entirely or partially--under the regulation’s requirements prior to the July 2015 amendments,” the letter reads. “Since the DOD does not examine financial institutions, it is critical that the DOD pledge to work with the federal financial regulators to ensure the safe harbor will be observed by lenders’ prudential regulators.”

In the letter, CUNA asked the DOD to clarify that raw land loans (neither secured by a dwelling nor vehicles or other personal property being purchased) are not covered by the MLA rule, since those type of loans are not often obtained by servicemembers. 

CUNA also offered to provide the DOD with a comprehensive list of issues not addressed in the guidance which credit unions continue to need clarification. It also sent copies of the letter to the NCUA and Consumer Financial Protection Bureau.