August 11, 2017

DoD: No MLA extension for credit cards "at this time"

The Department of Defense informed NAFCU in a letter that, at this time, it would not delay its Oct. 3 implementation date for credit card compliance under the Military Lending Act rule.

The letter was signed by Virginia Penrod, chief of staff in the Office of the Undersecretary of Defense. She notes in the letter that she has been delegated the authority to act on behalf of the DoD; to date, there are no political appointees named to this office.

She was responding to a letter sent to the DoD in March from NAFCU Executive Vice President of Government Affairs and General Counsel Carrie Hunt. The MLA rule took effect last October, but it included a one-year limited exemption for credit cards. In her letter, Hunt pointed to a need for more clarity in the rule and urged an immediate extension of the credit card account compliance deadline.

"Credit unions have undertaken considerable efforts to comply with the MLA rule, and they will continue to do so, but the rule's application to credit card accounts presents many unique challenges," Hunt wrote. "These challenges suggest that without substantial additional regulatory clarity, many financial institutions will struggle to offer MLA-compliant products. For this reason, we request that the Department immediately exercise the authority it reserved in the MLA rule and extend the exemption for credit card accounts for a full year, until October 3, 2018."

The DoD's response notes that the final rule, as written, was sensitive to feedback from the financial services industry through its "exclusion of bona fide fees and the option of asserting safe harbor for reasonable bona fide fees."

NAFCU has met with representatives from the DoD numerous times on credit-union-specific issues and concerns about MLA compliance. The association also sent a letter in May with recommended guidance text and signed onto a letter in June with a coalition of trade associations urging an extension of the credit card compliance date. The association 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.