The Military Lending Act –
NCUA’s Enforcement and
Supervisory Role
Defense Credit Union Council
Defense Issues 2016
The information contained in this presentation is for informational purposes only and is provided as a public service and in an effort to
enhance understanding of the statutes and regulations administered by the NCUA. It expresses the views and opinions of staff of NCUA
and is not binding on NCUA or NCUA Board Members. Any representation to the contrary is expressly disclaimed.
Agenda
• Background and Overview
• 2015 Changes – Old vs. New
• Prohibitions
• Penalties and Civil Liability
• Effective Dates
• Next Steps
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Background and Overview
• Talent Amendment, a.k.a. Military Lending
Act – 10 U.S.C. § 987
• Regulations – 32 C.F.R. Part 232
– Amended and published in the Federal Register July 22, 2015, at
80 F.R. 40560
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Previous Scope
• Covered Borrowers: Active duty service
members and their dependents
• Covered Products:
– Payday loans
– Vehicle title loans
– Refund anticipation loans
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Scope After Amendments
Amended regulation issued July 22, 2015
• Covered Borrowers: Still active duty servicemembers
and their dependents (dependents re-defined)
• Covered Products: Expanded to cover TILA credit (with
exceptions)
– 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 installments
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Coverage
Products not covered
• Mortgage loans
• Loans/credit to purchase a vehicle or personal
property if secured by the vehicle or personal
property
• Business loans/credit
• Loans/credit to non-covered borrowers
• Other Reg. Z exempt credit – such as federal student
loans, over $54,600 for most products, securities,
public utility credit, home fuel budget plans
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Military APR (MAPR)
• MAPR to covered borrowers capped at 36
percent
• MAPR = APR under Reg. Z plus some
excluded items
• For PALs, exclude 1 application fee in a rolling
12-months period
• Bona fide fees excluded for credit card MAPR
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Required Disclosures
• All TILA/Regulation Z disclosures
• Statement of MAPR
• Clear description of payment obligation
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Identifying Covered Borrower
• Credit union can use its own method
• Changes to safe harbor provision
• Must check before consummation
• Must keep record of checking
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Covered Transactions
PREVIOUS VERSION
AMENDED VERSION
Applied to:
Applies to:
-Payday loans (“Closed-end credit with -Consumer credit covered by
a term of 91 days or fewer in which the TILA/Reg. Z (includes credit card
amount financed does not exceed
accounts, overdraft credit lines)
$2,000”)
Not covered:
-Vehicle title loans
-Mortgage loans
-Tax refund anticipation loans
-Vehicle/personalty purchase loans
secured by the vehicle/personalty
purchased
-Non-consumer loans
-Loans to non-covered borrowers
-Other credit exempt under Reg. Z
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Covered Borrowers
PREVIOUS VERSION
AMENDED VERSION
At time credit incurred:
-Active duty A, N, MC, AF, CG
(or under call/order >30 days)
-Active Guard/Reserve duty
-Member’s spouse, child (38
USC 101(4)), and person
getting >1/2 support from
member
At time credit incurred:
-Member of armed services on
active duty per title 10, 14, 32
USC (or under call/order >30
days)
-Active Guard/Reserve duty
-Dependent (per 10 USC
1072(2)(A), (D), (E), (I))
-Coverage ends when
member’s service ends
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Covered Creditors
PREVIOUS VERSION
AMENDED VERSION
-As per Reg. Z
-As per Reg. Z; and
-Assignee of Reg. Z
creditor
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Military APR (MAPR)
PREVIOUS VERSION
AMENDED VERSION
-Capped at 36 percent
-Slightly different, but
contrast to APR is of
greater significance
-Capped at 36 percent
total for closed-end
-Capped at 36 percent for
any billing cycle for openend
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Payday Alternative Loans (PALs)
PREVIOUS VERSION
AMENDED VERSION
-No special provision
-Special provision for “short-term,
small amount loan” (defined term)
• Closed-end loan
• 36 percent APR cap
• Made under federal law, w/<36
percent rate cap for FCU or
“insured depository institution”
under Fed. Deposit Insur. Act
• Made under rule w/ a 9-mo.
max. term & numerical fee max.
-One application fee in rolling 12month period excluded from MAPR
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Credit Card Accounts
PREVIOUS VERSION
AMENDED VERSION
-Not covered
-Covered – 36 percent MAPR cap in any
billing cycle
-MAPR calculated per Reg. Z, but fees for
opening, renewing or continuing account
are included in MAPR
-No fees allowed in billing cycle with zero
balance (except for annual participation
fee of <$100)
-Exclude from MAPR all bona fide and
reasonable fees (with exception), except
fees for credit insurance, debt
suspension/cancellation, ancillary
product (safe harbor: average of same
fee charged by 5 large creditors during
previous 3 years)
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Covered Borrower Status
PREVIOUS VERSION
AMENDED VERSION
-Borrower signs “covered
borrower identification
statement”
-If not, creditor may request
applicant to provide
documents proving status; or
-Creditor may verify through
Defense Manpower Data
Center database
-Any method is permissible
-Safe harbor if creditor verifies
through Defense Manpower
Data Center database, or
verifies through consumer
report from nationwide
consumer reporting agency or
reseller
-Recordkeeping required
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Disclosures
PREVIOUS VERSION
AMENDED VERSION
-MAPR (“X%”) and total dollar
amount of MAPR charges
-TILA/Reg. Z disclosures
-Description of payment
obligation (payment schedule
suffices)
-Statement of rights
-Written and oral (TILA/Reg. Z
written only)
-Statement of MAPR (model
statement)
-Reg. Z disclosures
-Description of payment
obligation (payment schedule
for closed-end and account
opening disclosures for openend)
-Written and oral (Reg. Z
written only); oral can be in
person or by toll-free number
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Model Statement of MAPR
Federal law provides important protections to members of
the Armed Forces and their dependents relating to
extensions of consumer credit. In general, the cost of
consumer credit to a member of the Armed Forces and his
or her dependent may not exceed an annual percentage
rate of 36 percent. This rate must include, as applicable to
the credit transaction or account: The costs associated
with credit insurance premiums; fees for ancillary
products sold in connection with the credit transaction;
any application fee charged (other than certain application
fees for specified credit transactions or accounts); and any
participation fee charged (other than certain participation
fees for a credit card account). 232.6(c)(3).
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Limitations
PREVIOUS VERSION
-No rollovers/renewals with
proceeds from other credit
extended by same creditor, unless
under terms more favorable to
borrower
-Creditor cannot require allotment
AMENDED VERSION
-Rollover/renewal prohibition not
applicable to chartered/licensed
bank, savings association or credit
union (“more favorable terms”
exception to rollover/renewal
eliminated)
-Allotment prohibition not applicable
to military welfare society or service
relief society
-Creditor (other than
chartered/licensed bank, savings
association or credit union) cannot
use title of vehicle as security
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Retained Prohibitions
• Waiver of rights under federal or state law
– Includes Servicemembers Civil Relief Act
• Mandatory arbitration
• Unreasonable notice requirement before
borrower brings an action
• Onerous legal notice provision
• Prepayment prohibition or penalty
• Use of allotment to repay the obligation (new
exceptions)
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Retained Prohibitions (cont’d)
• Use of check or other means to access a
borrower’s account
– Exceptions if MAPR less than 36 percent:
• Credit union can require electronic fund transfer to pay, unless
prohibited by law;
• Credit union can require direct deposit, unless prohibited by law;
or
• Credit union can take a security interest in borrowed funds
deposited into an account established in connection with the
consumer credit extension, unless prohibited by law.
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Penalties and Enforcement
• Knowing violation is misdemeanor
– Up to one year in prison; and
– Fine
• Administrative enforcement as under TILA
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Civil Remedies
•
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Actual damages but not less than $500
Appropriate punitive damages
Equitable relief (including injunction)
Costs and reasonable attorney fees
Any other relief permitted by law
Must bring action within two years of
discovery and not later than five years from
violation
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Civil Remedies
• Defense:
– Act was not intentional; and
– Bona fide error, despite process in place
reasonably adopted to prevent such errors (error
of law not a defense)
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Effective Dates
• Changes have several effective dates –
generally, October 1, 2015
– Compliance with new provisions required starting
October 3, 2016
– Change in safe harbor for identifying covered
borrowers effective October 3, 2016
– Credit card provisions effective October 3, 2017
– Civil liability provisions effective October 1, 2015
• Apply to transactions from January 2, 2013, to present
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Next Steps
• NCUA will issue a second Regulatory Alert
with a detailed discussion of the revised MLA
regulatory provisions
• NCUA staff is drafting examination
procedures
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Contact Information
• Matt Biliouris
– matthewb@ncua.gov
• Jamie Goodson
– jgoodson@ncua.gov
• Joe Goldberg
– jgoldberg@ncua.gov
• Office of Consumer Protection, Division of
Consumer Compliance Policy and Outreach
– Compliancemail@ncua.gov
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