February 08, 2018

NAFCU continues to press DoD for relief from MLA compliance challenges

NAFCU on Wednesday joined other financial industry trades, the Department of Defense (DoD) and federal regulators to discuss the compliance challenges associated with the DoD's explanation of guaranteed acceptance protection (GAP) insurance housed within the Military Lending Act (MLA) rule.

Representatives from the DoD, NCUA, CFPB, Federal Trade Commission (FTC), Federal Deposit Insurance Corporation and Defense Credit Union Council (DCUC) were part of the discussion.

The challenges stem from question-and-answer No. 2 of the department's 2016 interpretive rule amendments. The question has created confusion for credit unions and their third-party vendors as it seems to prohibit access to GAP insurance for the MLA-covered borrower when they want to finance the insurance with the loan used to purchase the vehicle.

GAP insurance protects against situations when a purchased vehicle is destroyed or stolen and the value of that vehicle is less than the remaining loan balance.

During Wednesday's discussion, NAFCU, DCUC and others urged the DoD to rescind the question from its interpretive rule and subsequent amendments due to the compliance challenges and confusion.

In a letter to the DoD last week, NAFCU and the DCUC also called on the department to rescind the question, explaining that if a servicemember is caught in a situation where GAP insurance is needed and they don't have it, it could have a negative impact on their overall financial health.

NAFCU has highlighted to the DoD credit unions' commitment to protecting servicemembers and their families from financial exploitation, and the substantial efforts the industry has already undertaken to comply with the MLA rule.

NAFCU has also been working with other trade groups continuously this year to strategize how best to achieve clarification on the 2016 interpretive rule amendments and receive more guidance and revisions on the MLA rule.

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.