CUs should be exempt from MLA proposal, says CUNA

December 22, 2014

WASHINGTON (12/23/14)--A revamped Military Lending Act (MLA) could negatively affect the delivery of high-quality, reasonably priced financial products to servicemembers, reads a joint letter from numerous credit union stakeholders, including the Credit Union National Association.

The Department of Defense (DOD) proposal would place a 36% cap on the military annual percentage rate (APR) of interest for credit products, as well as other protections.

"From our perspective as credit unions' advocates, any changes to the current rules should curtail and eliminate the unscrupulous business practices of organizations targeting our military personnel--and not harm credit unions that are dedicated to the financial well-being of their member-owners," reads the letter, which was also signed by the leaders of the African-American Credit Union Coalition, Defense Credit Union Council, National Association of Federal Credit Unions and the National Association of State Credit Union Supervisors.

The letter goes on to say that the services and products that have been cited as the need for the proposal are generally not offered by credit unions. None of the lenders mentioned in the proposal are credit unions.

This--along with the fact that credit unions face a number of other compliance burdens from the current MLA rule, the Dodd-Frank Act, the National Credit Union Administration, the Consumer Financial Protection Bureau (CFPB) and state regulators--is reason enough that credit unions should be exempt from the proposal.

"The credit union industry strongly urges DOD to exempt credit unions completely from the proposed changes, including new coverage under an expanded definition of 'consumer credit,' which would apply to certain open-end credit products. In this case, credit unions would remain covered by the existing MLA rule," the letter reads.

The letter also urges the DOD to work with the NCUA to ensure the agency's Payday Alternative Loans (PAL) product can continue to be offered, and are "properly excluded" from the proposal changes. NCUA Chair Debbie Matz wrote to the DOD last week with a similar request.

Credit unions support further efforts to educate servicemembers, the letter concludes, and the DOD is encouraged to collaborate with entities such as the CFPB. The letter pledges credit union assistance for financial education outreach at the national and local levels.