Newsroom

NAFCU's Compliance Blog takes a closer look today at the Defense Department's proposal to expand the Military Lending Act rule's 36 percent rate cap to more credit products.

The current MLA protections extend to closed-end payday loans for no more than $2,000 and with a term of 91 days or fewer, closed-end auto title loans with a term of 181 days or fewer, and closed-end tax refund anticipation loans. Shari Pogach, NAFCU's regulatory paralegal, explains DoD is proposing to amend the definition of "consumer credit" to more closely match the definition under the Truth in Lending Act, covering more credit products.

Pogach highlighted elements of the proposal, which calls for "loan disclosures intended to simplify a lender's disclosure obligations to covered borrowers under the MLA" and allowing lenders "to assess whether borrowers are covered by the MLA by checking their status in an existing, publicly available online DoD database."

NAFCU will continue to work with stakeholders and to monitor this issue for its potential effects on servicemembers and credit unions serving them.

Carrie Hunt, NAFCU's senior vice president of government affairs and general counsel, warned of the possible unintended consequences of the DoD proposed rule in comments to American Banker and The Wall Street Journal. She is quoted in a WSJ blog post noting, "We want to ensure that there are no unintended consequences from this rulemaking that would prevent credit unions, particularly those operating on military installations, from providing the safe consumer-friendly products the men and women of the armed services have come to depend on."