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Today the U.S. Department of Defense (DoD) expanded the
types of credit products that are covered by a 36% rate cap and other
military-specific protections under the Military Lending Act (MLA) through a
final rule. CUNA had previously filed
comments with DoD in response to their proposal.
CUNA continues to strongly support MLA protections for
servicemembers from unscrupulous business practices of organizations targeting
our military personnel, but has concerns that the rules scope is overly broad.
Specifically, CUNA is disappointed that there was not a blanket exemption for
credit unions who provide alternatives to predatory loans, and who seek to
provide their members with products and services at a fair and reasonable rate.
CUNA also previously expressed concerns that burdensome
regulations in this area could ultimately reduce the ability of credit unions
to provide the products and services to service members and their families,
that they want and need.
The final rule announced Tuesday broadens the definition
of “consumer credit” from the original narrow parameters under the MLA, which
defined “consumer credit” products as:
Under the new definition, the DoD said the term would be
"be defined consistently with credit that for decades has been subject to
the disclosure requirements of the Truth in Lending Act (TILA), codified in
Regulation Z, namely: credit offered or extended to a covered borrower
primarily for personal, family, or household purposes, and that is (i) subject to a finance
charge or (ii) payable by a written agreement in more than four
The MLA regulation would, however, continue to exclude
residential mortgages and credit extended to finance the purchase of, and
secured by, personal property, such as vehicle purchase loans.
goes into effect on Oct. 1, and compliance is required by Oct. 3, 2016 - a safe
harbor that CUNA appreciates for compliance purposes.
CUNA also had urged the DOD to work with the NCUA to
ensure the agency's Payday Alternative Loans (PAL) product can continue to be
offered, and are excluded from the proposal changes. We are currently in the
process of analyzing the final rule to determine all possible effects on credit
unions. Please also check our COMP
BlOG for more information on this rule.
For more information, please contact Leah Dempsey, Senior Director of Advocacy and Counsel.
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