Deadline to Express Interest in Direct Access to DMDC MLA Database is on Monday, February 15th
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Written by Benjamin M. Litchfield, Regulatory Compliance Counsel
Happy Friday Compliance fans! The deadline to express interest in direct access to the U.S. Department of Defense's Defense Manpower Data Center (DMDC) Military Lending Act (MLA) database is on Monday, February 15th. The database provides a mechanism for checking whether a particular loan applicant is a covered borrower under the MLA. We have received many questions on this issue, including how to connect and what benefits are associated with directly connecting to the MLA database.
In order to take advantage of the safe harbor in 32 C.F.R. 232.5(b), credit unions must verify the status of a consumer using information obtained directly or indirectly from the MLA database or by requesting a consumer report from a nationwide consumer reporting agency such as Experian, TransUnion, or Equifax. The safe harbor allows credit unions to legally conclusively determine whether a consumer is a covered borrower with respect to the transaction or account that prompted the covered-borrower check so long as the credit union creates and maintains a record of the information obtained by the MLA database or the credit reporting agencies in a timely fashion.
Currently, the MLA database provides credit unions with two options for performing a covered-borrower check the credit union can submit a single record request or request multiple records as in batches. The MLA database will currently accept up to 50 large batch data queries per financial institution per day as part of its large batch option. Each of these 50 queries can have as many as 250,000 individual requests. However, there is a 24 hour turn around on this option which some credit unions may find problematic especially for certain kinds of products. Starting in October 2016, credit unions that are directly connected to the MLA database can perform covered-borrower checks in real-time.
The main benefit of direct connection is higher volume and faster turnaround. Credit unions that anticipate performing multiple batched inquiries across different branches in a single day may find the 50 query limitation prohibitive and may appreciate the freedom of conducting multiple inquiries without having to worry about whether or not the credit union has reached its overall limit for that day. More importantly, directly accessing the database can provide credit unions with immediate answers and can expedite the loan origination process if the credit union has concerns that the borrower may be a covered borrower under the MLA.
That being said, direct connection may not be appropriate for all credit unions. For example, directly connecting to the MLA database may require credit unions to reconfigure their systems which may impose costs that outweigh the benefits of direct connection. This will be something for credit unions to consider over the weekend before the deadline expires. It is also important to note that not all financial institutions who express interest will be guaranteed access by the October compliance deadline given limitations with DMDC's resources. The ability to connect will not be provided on first come, first service basis but rather on a need-based basis. Institutions expected to have the highest volume are being viewed has having the highest need.
After February 15th, credit unions that may not want to directly connect to the MLA database but would still like to take advantage of the safe harbor in the MLA Rule can still submit single or multiple report requests through the MLA website or conduct a covered-borrower check using a consumer report from a national consumer reporting agency. Experian and Equifax have set up MLA support e-mail addresses for their customers for questions that credit unions may have:
Experian: mla.support@experian.com
Equifax: MLASupport@equifax.com
So how do credit unions go about expressing interest in directly connecting? Credit unions can simply send an e-mail to dodhr.dodc-mb.dmdc.mbx.mla@mail.mil providing DMDC with contact information and expressing interest in direct connection to the MLA database. Once the credit union sends the e-mail expressing interest, DMDC will respond with a questionnaire that must be completed by February 19th.
If you have any questions about this deadline or the database, please email Brandy Bruyere, NAFCU's Director of Regulatory Compliance, at bbruyere@nafcu.org.
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Programming Note: NAFCU's offices will close at 12:00 p.m. today in honor of Presidents' Day. We will remain closed on Monday and reopen again on Tuesday. We hope you all enjoy your long weekends!