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NAFCU Regulatory Compliance Counsel Benjamin M. Litchfield highlighted the major points of the Defense Department's new Military Lending Act guidance in a NAFCU Compliance Blog post today.

The DoD's interpretive rule includes the NAFCU-sought clarification that the MLA will not prohibit the use of statutory lien authority by federal credit unions.

Litchfield explained that the MLA "neither prohibits credit unions from exercising statutory lien rights nor prohibits share secured loans. Instead, the guidance indicates that despite its broad language, Section 232.8(e) is intended to prevent creditors from creating remotely created checks or remotely created payment orders in order to collect payments from a covered borrower."

He continued: "This interpretation harmonizes this section of the regulation with the text of the Military Lending Act itself which merely prohibits creditors from using ‘a check or other method of access to a deposit, savings, or other financial account maintained by the borrower, or the title of a vehicle as security for the obligation.' "

The MLA rules will take effect on Oct. 3. NAFCU's Regulatory Compliance team is studying the guidance and will update the association's MLA Compliance Guide in advance of the effective date.

The DoD guidance also clarifies how financial institutions should provide oral disclosures.

The new MLA rule expands the number of products covered by MLA, meaning credit unions will have to revamp how they identify covered borrowers and services.

NAFCU's extensive collection of MLA compliance resources is available online.