Removing Barriers Blog

CUNA Continues to Press Regulators on DoD’s MLA Rule
Posted December 09, 2015 by CUNA Advocacy

Yesterday, we met with 15 staff members from five different federal financial regulatory agencies to pursue improvements and clarification regarding the Department of Defense regulation issued this summer under the Military Lending Act, which among other things, limits the amount of interest that a creditor may charge on “consumer credit” to an APR (referred to as a Military APR or MAPR) of 36%. This MAPR only applies to servicemembers and their dependents. 

We expressed our concern with identifying the status of a covered borrower for purposes of a safe harbor offered by the rule. We also sought clarification on penalties under the rule, disclosures required by the rule, as well as the components that make up the MAPR calculation. Prior to yesterday’s meeting, we've been in regular contact with both the DoD and NCUA regarding concerns with and confusion regarding this final rule. We will update you on items we are seeking clarification on through this blog.

The final rule amends “consumer credit” by extending the definition to a much broader range of closed-end and open-end credit products. Previously, “consumer credit” was limited to three categories of products: payday loans, vehicle title loans, and refund anticipation loans. Under the final rule, DoD expands the scope of the MLA regulation by aligning its with the Truth in Lending Act and Regulation Z; as amended, “consumer credit” covered under the MLA is now generally consistent with credit covered by Regulation Z.

Thus, a wide range of credit transactions that are subject to Regulation Z—including open-end credit and installment loans—are now also subject to the MLA regulation for the first time. This rule also represents the new nationally applied usury ceiling. However, the final rule does not apply to residential mortgage loans, secured motor vehicle and personal property loans, and transactions not covered by Regulation Z.

While the final rule became effective October 1 of this year, compliance is not mandatory until October of 2016. Our Compliance Team has developed this detailed final rule analysis of the MLA regulation.