MLA Changes and How They Affect Your Credit Union
Last year’s revisions to the Military Lending Act (MLA) regulations has generated quite a bit of buzz in recent days. You might be wondering how these changes will affect your forms, and what action you need to take. The good news is that if you are currently using Oak Tree forms for the types of credit that will be covered by the MLA, then your current forms are compliant, despite the revisions made to the MLA. Here is a more detailed look:
The current MLA regulations were issued in 2007, and were designed to protect active-duty members and their families (“Covered Borrowers”) from the most egregious forms of predatory lending. Whether a person is a Covered Borrower is determined by a service member’s active-duty military status. The MLA protections presently apply only to credit extended to service members and their immediate family members while the service member is on active duty, and focus exclusively on: (i) payday loans of $2,000 or less with terms of 91 days or less; (ii) vehicle title loans (non-purchase money loans with terms of 181 days or less secured by a motor vehicle’s title); and (iii) tax refund anticipation loans. These loans are referred to as “Consumer Credit” transactions under current MLA regulations.
- Dwelling-secured loans, including loans to finance the purchase or initial construction of the dwelling, refinance transactions, home equity loans, home equity lines of credit, and reverse mortgages;
- Loans to finance the purchase of a motor vehicle when the loan is secured by that vehicle; and
- Loans to finance the purchase of other types of personal property when the loan is secured by that property.
Because of the significant civil liability provisions, credit unions must familiarize themselves with the requirements of the MLA and DoD regulations as revised, to ensure compliance by the effective dates. The MAPR limitations must be taken into account when credit is furnished to Covered Borrowers in order to avoid this potentially costly civil liability. It is strongly recommended that a MLA due diligence process be incorporated into application procedures in order to take advantage of certain safe harbor provisions contained in the new regulations.
Here is where the good news comes in. Although the credit union’s consumer lending operations are clearly affected by the new requirements, your forms remain compliant. Again, Oak Tree’s counsel has advised that Oak Tree’s current forms will not require revisions. The reason for this? Chat with us to find out why.
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