WASHINGTON—CUNA said it is continuing its broad advocacy efforts to secure “substantive compliance guidance” for credit unions regarding changes to the Military Lending Act (MLA).
In its latest action, CUNA provided a document with a list of credit union compliance concerns to a Listening Session coordinated Tuesday by the U.S. Department of Defense. The session also included representatives from the NCUA, CFPB, Federal Reserve Board, and the Federal Trade Commission.
CUNA noted that while NCUA shared MLA guidance last month with credit unions, and that the NCUA document provides a “useful, complete summary of the rule,” CUNA is “adamant that credit unions need answers to the far-reaching concerns” if they are to meet an Oct. 3 compliance deadline.
The changes to the MLA were finalized in July 2015, and said it CUNA followed up with a final rule analysis. They extend 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).
“Simply put, credit unions need more clarifications on this rule so they can continue to serve their military members,” said Elizabeth Eurgubian, CUNA’s deputy chief advocacy officer. “This is a phenomenally complex rule and dedicated guidance on these changes is needed to ensure that military members get the services and protections they deserve.”
CUNA stated that during the Tuesday session, and in previous meetings and calls with the DOD, CUNA raised questions about how the MAPR will be computed, which is necessary for credit unions to know well before the Oct. 3 compliance deadline.
“Credit unions calculate APR through their core processing systems, and therefore are heavily reliant on their vendors to make the correct calculations,” said Jared Ihrig, CUNA’s chief compliance officer, repeating an exchange he had with DOD staff during the meeting. “We need guidance sooner rather than later, because without it vendors don’t know how to adjust their systems, which makes it extremely difficult to ensure compliance with the rule. This would give credit unions no choice but to remove products and services geared toward servicemembers, and we don't want that.”
It can take vendors that handle consumer loans, such as the ones covered under MLA, an extended time to implement changes to a calculation, CUNA explained.
CUNA said it also remains concerned about a section of the MLA that permits a creditor to take a security interest only in funds deposited after the extension of credit and in an account established in connection with the loan.