Compliance Center: NCUA Issues Guidance on Military Lending Act Changes

The National Credit Union Administration (NCUA) has issued guidance to credit unions on how to comply with the U.S. Department of Defense’s (DoD) rule changes for lending to active-duty members of the U.S. military, their families and dependents.  The guidance, Complying With Recent Changes to the MLA Regulation, was issued as regulatory alert 16-RA-04.

If your credit union provides consumer credit to active duty Service members, their family members or dependents, you likely will have to comply with the final rule that creates new requirements for most non-mortgage related consumer credit transactions. The final rule expands coverage of the current regulation, provides safe harbor methods for identifying covered borrowers, prohibits the use of certain practices, and amends the content of required disclosures.

One important exception to point out involves Payday Alternative Loans (PALs). If your credit union offers PALs in accordance with NCUA’s regulation, under the Military Lending Act you can exclude one application fee in a rolling 12-month period from the military annual percentage rate.

In addition, the NCUA suggests affected credit unions take several actions before the applicable compliance dates:

  • Become familiar with the requirements of the Final Rule;
  • Determine the business, process, and system changes needed to comply with the Final Rule;
  • Develop a plan to implement the new requirements by the compliance dates, including developing a schedule and a budget;
  • Review the plan with executive management;
  • Identify third-party relationships impacted by the Final Rule, including relationships with vendors. Contact vendors to make sure they can implement the necessary changes and deliver relevant software on time and to address any questions about the new processes and who will undertake which tasks;
  • Develop and provide training for staff and management;
  • Test and implement technology changes; and
  • Roll out changes in time to meet the applicable compliance dates.

Compliance Question of the Week

Under the new Military Lending Act (MLA) amendments, is a recently purchased auto that is refinanced by the credit union in a short amount of time after purchase exempt from the MLA’s coverage under the “purchase vehicle” exemption?

No, the refinance would not be exempt from the MLA’s coverage.

Under the final rule, credit that is expressly intended to finance the purchase of a motor vehicle when the credit is secured by the vehicle being purchased is exempt from the definition of consumer credit. Unfortunately, a refinance, even if done within a relatively short time after the purchase of the vehicle, would not fall under this exemption because it is not expressly intended to finance the purchase of the vehicle.

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Legal Briefs

National Credit Union Administration (NCUA)

The NCUA announced that the total shares and deposits at federally insured credit unions grew past $1 trillion during the fourth quarter of 2015. The NCUA’s summary of the most recent call report data also indicated that assets and lending are growing in credit unions in addition to their deposits.

NCUA Chair Matz urged credit unions to share the agency’s online consumer resources aimed at educating members about protecting their identities and finances during National Consumer Protection Week.

Consumer Financial Protection Bureau (CFPB)

The CFPB announced that it has established a process to consider applications to designate additional areas as “rural”. This is in response to the feedback that the CFPB has received on its most recent updates to the mortgage rules which further defined creditors operating in rural and underserved areas.  The CFPB will begin accepting applications on March 31, 2016.

The CFPB announced that its monthly complaint snapshot focused on prepaid products. Among the complaints expressed by consumers were the inability to access funds on the card, cards re-issued without former balances, and fees associated with using prepaid cards.

Federal Reserve Board (FRB)

The FRB, jointly with the OCC and FDIC, issued interagency guidance aimed at addressing the weaknesses observed in large financial institutions’ funds transfer practices related to funding and liquidity risk.

The FRB released the updated version of its Beige Book which provides a summary of commentary on current economic conditions by Federal Reserve District.

The March 2016 issue of the FRB’s Fedfocus is now available.

The FRB recently updated its Q&A regarding the Volcker Rule.

The FRB announced a proposed rule to address the risk associated with excessive credit exposure of large banking organizations to a single counterparty. The proposal would apply single-counterparty credit limits to bank holding companies with total consolidated assets of $50 billion or more.

The FRB, FDIC, and OCC issued interagency guidance on the use of evaluations in real estate related financial transactions.

Federal Trade Commission (FTC)

The FTC released its annual summary of consumer complaints. Topping the list of complaints were debt collection and identity theft.

Financial Crimes Enforcement Network (FinCEN)

FinCEN announced a proposed revision to its rules governing the filing of Reports of Foreign Bank and Financial Accounts (FBAR).

Federal Housing Finance Agency (FHFA)

The FHFA released its 2015 Scorecard Progress Report. The Progress Report focuses on the steps that the FHFA has taken to achieve its objectives regarding Fannie Mae and Freddie Mac.

Federal Deposit Insurance Corporation (FDIC)

The FDIC announced that it will hold a webinar on cybersecurity resources for financial institution customers as part of National Consumer Protection Week 2016. The webinar will be held on Wednesday, March 9th.

The FDIC released its most current CRA Compliance Ratings for banks recently examined for CRA compliance.

U.S. Department of the Treasury (Treasury)

The Treasury released a summary of its most recent Financial Stability Oversight Council Meeting.

Office of Foreign Assets Control (OFAC)

OFAC has updated the SDN list as of March 02, 2016. The last update prior to this was February 16, 2016.

Questions? Contact the Compliance Hotline: 1.800.546.4465,

Posted in Compliance News, NCUA.