December 23, 2014

Berger: MLA change would hurt CU members

NAFCU President and CEO Dan Berger wrote the Defense Department to reiterate NAFCU's concerns about unintended consequences from the Defense Department's proposed amendments to the implementation of the Military Lending Act, and to explain that the changes would hurt credit unions' ability to provide credit products to servicemembers.

Berger requested that the DoD exempt credit unions from the proposed changes, and allow them to continue under existing MLA regulations. As an alternative, he requested they exempt payday alternative loans (PALs) from the changes.

"This proposed rule, if finalized, could impact credit unions' ability to provide credit products to servicemembers due to the interest rate restrictions already imposed on credit unions. The additional cost of compliance would also severely impact small and mid-sized credit unions and provide another barrier to offering small dollar loans generally," Berger wrote.

He continued, "NAFCU believes strongly that it was not the overall intent of Congress to curtail the practices of abusive payday lenders at the expense of frustrating the ability of legitimate and fair lenders to provide financial products and services that are in the best interest of America's military families."

On Monday, NAFCU and four other credit union trade associations wrote the DoD on the same subject. NCUA Chairman Debbie Matz has also requested that PALs be exempted.

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 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.