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MCUA Offers Improvements to DoD on Military Lending Act Proposal

The Missouri Credit Union Association (MCUA) submitted a comment letter to the Department of Defense (DoD) regarding a proposal that would implement various provisions of the Military Lending Act (MLA). The proposed changes to DoD’s regulations would, among other things, expand the definition of “consumer credit” and cap at 36% the APR charged for credit products covered by the regulation, including credit cards.

MCUA supports appropriate protection from abusive practices for military members but we have serious concerns about the expansion of the proposal. 

MCUA believes DoD’s existing MLA rule is an appropriate tool for addressing predatory lending practices targeted by the proposal. MCUA firmly believes the rule in great part has been an effective tool in protecting military consumers and curbing predatory lending. The current rule is properly focused on practices that are abusive and MCUA urges DoD to continue its targeted approach.

MCUA is concerned that the proposed changes would have unintended consequences for some credit unions and could jeopardize extension of some consumer credit to service members and their families. The proposal would revise the definition of “consumer credit,” including by expanding its coverage. Therefore, MCUA urges DoD to refrain from adopting its changes as proposed. However, if DoD does finalize its proposal, it should make a number of changes to limit any unintended consequences, including by:

  • Exempting credit unions and other depository institutions (as put forth as a possibility by DoD in the proposal).
  • Providing an exception from aspects of the proposed changes for credit unions, such as the proposed expansion of the term “consumer credit.” Also, DoD should consider excepting certain credit union products, including loans made under NCUA’s Payday Alternative Loan Program (PAL) program.
  • Reconsidering the proposed approach regarding use of the MLA database, and related “safe harbor,” as MCUA believes DoD has not articulated sufficiently the process of accessing and relying on the database. (The proposal would create a “safe harbor” under which creditors could access the MLA Database to determine whether a consumer-applicant is a covered borrower under the rule for a particular transaction.)
  • Allowing as long an implementation period as reasonable to provide adequate time for credit unions and others to implement necessary changes.