December 13, 2017

DoD heeds NAFCU concerns in amended MLA interpretive rule

The Department of Defense (DoD) today published a revised interpretive rule for its Military Lending Act (MLA) amendments that were finalized in July 2015. NAFCU has actively worked with the DoD to address uncertainties stemming from the MLA changes, some of which are addressed in the amended interpretations.

Specifically, the DoD attempts to clarify which loans that are expressly intended to finance the purchase of a motor vehicle or personal property, where the credit is secured by the vehicle or property being purchased, qualify for the consumer credit exception.

In its first set of interpretations published in August 2016, the DoD clarified that this exemption does not cover loans for personal property that also include a "cash out" component, where the loan exceeds the value of the personal property securing the loan.

However, the revised interpretation says exceptions depend on what the credit over the purchase price is financing. If it applies to financing costs related to securing the vehicle or property, it is exempted. Financing other costs could disqualify the transaction from the exceptions.

The revised interpretations also address questions related to security interest and the timeline to determine a consumer's covered borrower status.

NAFCU will continue to push for more clarity in the form of guidance or revisions to the regulatory text for the industry. NAFCU has a host of MLA resources available here and will soon release an updated version of its Military Lending Act Guide taking into account these revised interpretations.