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NAFCU and four other credit union trade associations wrote the Federal Docket Management Systems Office to warn against unintended consequences from the Defense Department's proposed amendments to the implementation of the Military Lending Act. The letter particularly urged that credit unions be exempted completely from the proposed changes.

As an alternative, the credit union trades argued that DoD should exempt payday alternative loans (PALs) from the changes.

The proposal would apply a 36 percent military annual percentage rate cap to more consumer credit products and require credit unions to check all consumer credit applications against a DoD database to see if the rule's provisions apply to them.

NAFCU has expressed concerns that the DoD proposal could affect credit unions' ability to provide credit products to servicemembers.

"We take very seriously remarks by DoD and others that certain types of lenders continue to alter their products and services in order to evade the important protections of the MLA," the joint letter said. "However, because credit unions are not predatory lenders, they should be exempt from any modifications to DoD's rule concerning limitations on terms of consumer credit extended to service members and their dependents."

"Credit union PALs provide an NCUA-regulated quality short-term, small-dollar loan product that service members and their families have come to expect and rely on," the joint letter said. The letter also cited recent comments from NCUA Chairman Debbie Matz, who wrote the DoD last week to say PALs "serve as a viable alternative to predatory payday loans and can help members avoid or end dependency on those loans."

NAFCU has worked extensively with the DoD and CFPB on financial issues affecting servicemembers, whom credit unions have a long history of serving, and will continue to work with stakeholders and to monitor this issue for its potential effect on credit unions.