MLA Amendments: What They Mean for Your CU

The Military Lending Act’s (MLA) amendments officially took effect on Monday, October 3. The financial industry has been working hard to not only prepare for the changes required by the rule, but to simply understand the vague, yet complex requirements of the rule.

The most important thing for all credit unions to know is that this rule could possibly impact every single credit union. While there are some loans that exempt from coverage of this rule, there is no small creditor exemption or exemption based on location. If you have a member that applies for a loan that is not exempt from the rule and they are active duty military or a dependent of an active duty service member, the MLA will most likely apply.

The MLA used to only apply to a small market of loans, mostly payday and title loans. As of October 3, the MLA now applies to any consumer-purpose loan that is covered by Regulation Z with the exception of residential mortgages (including purchase and refinance), HELOCS, reverse mortgages, loans specifically for the initial purchase of a vehicle (that is also secured by the vehicle), loans specifically for the initial purchase of personal property (that is also secured by that property), and any credit exempt from Regulation Z.

So what does that leave? Person loans and lines of credit, loans that refinance a vehicle or personal property purchase, and even bare land loans. Credit cards are also covered under this rule, but the provisions do not take effect until 2017.

The rule provides two safe harbors for determining if your applicant is a covered borrower. First, the credit union can check the database that the Department of Defense has made available. The credit union would type in the information specific to the borrower(s) and will receive a report back that displays their status. If the credit union wants a more automated approach, the credit bureaus are updating their systems to include a notation denoting active duty or dependent for the consumer.

If a credit union has a covered loan under the rule, the loan is impacted in several ways. First, the credit union must calculate the Military Annual Percentage Rate (MAPR) which is similar to the annual percentage rate (APR), but includes additional fees in the calculation that aren’t calculated in the APR calculations we are used to under Regulation Z. Next, there are a few additional disclosures that are required in addition to the required Regulation Z disclosures. There are also some contractual provisions that are prohibited for covered loans, which may require contract amendments or separate contracts for covered loans. The cost of noncompliance with the MLA can equal the loan contract being considered void.

The industry has been working hard to make the necessary changes to ensure compliance by the effective date.  There are still some questions that are left unanswered as to the true intent of certain portions of the rule, so questions are still bound to arise. The Department of Defense released an interpretive rule to help clear up some of the confusion. The CFPB and FRB have released updated examination procedures which will give credit unions an insight into the different areas of the MLA that might be reviewed during an examination.

If your credit union has questions relating to the MLA, the Association’s Compliance Team is here to help! Please contact us at  or 800.546.4465 if you need help locating resources, tools, or have questions.

Compliance Question of the Week


Can a credit union require a member to purchase GAP insurance when extending an auto loan?

Yes.  However, if you require that the member purchase any insurance, debt cancellation or GAP, the fee would be considered a finance charge.  When you allow the member the option to purchase any of those products, the fee may be excluded from the finance charge as long as the credit union does the following: 1. Disclose in writing that the service is optional, 2. Disclose the amount of the fee and explain any limitations on the term of coverage if it does not run for the full term of the loan, 3. Obtain your member’s signature or initials indicating that your member wants to purchase the service.
Additionally, credit unions should consider the ramifications of requiring GAP insurance when extending an auto loan to a member that is on active duty as it could cause the MAPR to exceed the permissible rate allowed per the Military Lending Act.


12 CFR 1026.4(b)(10)
12 CFR 1026.4(d)(3)

Legal Briefs


National Credit Union Administration (NCUA)

The NCUA announced a proposal to rebrand its Office of Consumer Protection.  The office will be renamed as the Office of Consumer Financial Protection and Access, which meant to more accurately describe the roll of the office.

The NCUA announced that it will hold a webinar, Financial Education: Alternative Delivery Channels, on Wednesday, October 12, 2016. The webinar will discuss effective strategies for encouraging financial education and sound decision making by credit union members. Credit unions that wish to attend the webinar can register here.

Consumer Protection Financial Bureau (CFPB)

The CFPB released its September Consumer Complaint Snapshot which focuses on money transfer complaints. The top complaints include holds placed by money transfer service providers, errors with the dispute resolution process, and consumers falling victim to fraud schemes.

The CFPB published an approval of its new Uniform Residential Loan Application and the expanded collection of HMDA data in relation to the Equal Credit Opportunity Act.

The CFPB announced the release of updated exam procedures for the Military Lending Act.

The CFPB released the results of a Project Catalyst that focuses on offering an incentive for prepaid card users to put some of their money into a savings wallet. The study found that individuals that were offered an incentive to save reported less payday loan use than those that were not offered an incentive to save.

CFPB Director Cordray delivered prepared remarks to the Community Bank Advisory Council. The remarks focus on financial education and upcoming rules, such as the debt collection proposal.

Federal Reserve Board (FRB)

The FRB issued guidance, FedACH Services Settlement Tips, to help financial institutions understand the advices they will receive throughout the day.

FRB Chair Yellen delivered testimony to that Committee on Financial Services. The testimony focused on the steps the FRB has taken to strengthen its regulation and supervision of large financial institutions as well as community bank supervision.

The FRB issued revised interagency Military Lending Act examination procedures.

Federal Housing Finance Agency (FHFA)

The FHFA issued a proposal that would allow certain credit unions without federal share insurance to become members of the Federal Home Loan Bank (FHLB).

Office of the Comptroller of Currency (OCC)

OCC Comptroller Curry delivered prepared remarks regarding the risks associated with foreign correspondent banking at the 15th annual Anti-Money Laundering and Financial Crime Conference.

The OCC issued a final rule that establishes minimum standards for recovery planning by insured banks, savings associations, and federal branches of foreign banks with average total consolidated assets of $50 billion or more.

Federal Financial Institutions Examination Council (FFIEC)

The FFIEC announced the release of the 2015 HMDA data.

Office of Foreign Assets Control (OFAC)

OFAC has updated the SDN list as of September 29, 2016. The last update prior to this was September 28, 2016.

Questions? Contact the Compliance Hotline: 1.800.546.4465,

Posted in Compliance News, Federal, NCUA.