Department of Defense (DoD) Leases
Credit unions enjoy nominal lease space in federal buildings and on military bases from a provision in the Federal Credit Union Act. Military banks have been trying for years to get their own nominal lease provision. In 2018, the House version of the FY 2019 National Defense Authorization Act (NDAA) included a provision that would require the DoD to allow all banks to operate rent free on military installations. NAFCU did not support the provision, as it would grant a stronger, non-discretionary exception for bank leases. The bill went to a conference committee to work out the differences between the House and Senate versions. NAFCU sent to and worked with the conferees to ensure that the final NDAA conference report did not include this controversial provision. As Congress begins their work on the FY 2020 NDAA, NAFCU remains engaged.
Military Lending Act (MLA) Supervision
Under Acting Director Mulvaney, the Consumer Financial Protection Bureau (CFPB)routine supervisory examinations for MLA compliance as Mulvaney called into question the CFPB’s statutory authority to enforce the MLA. Director Kraninger has taken the same position, calling for Congress to give the CFPB the to conduct supervisory examinations for MLA compliance. However, the CFPB will continue to exercise its enforcement powers for violations of the MLA based on complaints received through its website and consumer response channels.
The National Credit Union Administration (NCUA) also examines credit unions for MLA compliance. In 2017, the NCUA made high-level reviews of MLA policies and procedures a supervisory priority.
Guaranteed Acceptance Protection (GAP) Insurance
In 2017, in an attempt to provide clarification, the DoD Question and Answer #2 (Question #2) of its in such a way that it virtually prohibits access to GAP insurance when the MLA covered borrower tries to finance the GAP insurance with the loan used to purchase the vehicle. By limiting the availability of GAP insurance, Question #2 has the potential to cause significant financial hardship as GAP insurance is a protection against situations where a borrower’s vehicle is destroyed or stolen and the value of the car is less than the remaining loan balance. The MLA Interpretive Rule has caused many credit unions and their vendors to no longer offer this product to service-members and their families. NAFCU has recommended that the DoD rescind Question #2 from the MLA Interpretive Rule to alleviate regulatory confusion and help credit unions provide vehicle loans to service-members. NAFCU has been actively talking and writing to regulators on the issue – for example, -NAFCU and the Defense Credit Union Council (DCUC) sent a to the DoD in January 2018 asking the DoD to rescind Question #2.
Many credit unions are concerned about how the DoD's interpretation of when a vehicle purchase loan may be a covered loan under the MLA impacts their auto lending and indirect loan programs. If a vehicle loan is an MLA covered loan, this can be problematic for many auto loans originated through indirect lending programs, particularly where the dealer originates the loan, because the MLA prohibits most lenders from taking a security interest in a motor vehicle. The uncertain status of secured vehicle loans originated by a dealer and sold to a credit union has been left unaddressed by the DoD.