The American Bankers Association, joined by six other prominent industry trade groups, is seeking to postpone by six months the date on which examiners will begin transactional testing of depository institutions for compliance with the Military Lending Act (MLA) final rule adopted by the Department of Defense (DoD) in July 2015 that dramatically expanded the scope of the MLA’s coverage. The request was made in a letter to the CFPB, the Fed, the FDIC, the OCC, and the NCUA (Agencies). The DoD consulted with the CFPB in developing the final rule, and the CFPB actively supported the DoD’s plans to expand MLA coverage.
MLA coverage was previously limited to only three types of consumer credit extended to active-duty service members and their dependents: closed-end payday loans with a term of 91 days or less in which the amount financed does not exceed $2,000, closed-end vehicle title loans with a term of 181 days or less, and closed-end tax refund anticipation loans. The final rule extends the MLA’s 36 percent interest cap and other restrictions to a host of additional products, including credit cards, installment loans, private student loans and federal student loans not made under Title IV of the Higher Education Act, and all types of deposit advance, refund anticipation, vehicle title, and payday loans (but residential mortgages and purchase-money personal property loans are excluded). Although the DoD’s final rule took effect on October 1, 2015, it applies only to consumer credit transactions or accounts that are consummated or established after October 3, 2016 for most products, and after October 3, 2017 for credit cards.
In their letter, the trade groups seek “express assurances” from the Agencies that until March 3, 2017, “MLA examinations will be limited to inquiries about the status of preparations to comply and that examiners will postpone transactional testing for compliance,” thereby “giving industry six months to implement and test its MLA compliance systems.”
The trade groups note that it was not until last week, on August 26, 2016, that the DoD published in the Federal Register an interpretive rule to provide guidance regarding compliance with the July 2015 final rule. They state in their letter that because of the absence of clear guidance on how to interpret and comply with several requirements of the final rule, depository institutions have been unable to finalize and test their MLA compliance policies and programs. They also state that the Agencies have similarly been unable to issue examination procedures, which depository institutions review to confirm their understanding of the final rule and ensure their implementation plans comply with supervisory expectations. The trade groups also note that credit bureaus do not expect to be able to provide military status information to depository institutions until mid-September, which would leave very little time to train staff and vendors and test systems before the October 3 effective date.