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CFPB Releases Exam Procedures for Updated MLA Rule
Tuesday, October 4, 2016 6:45 AM

The Consumer Financial Protection Bureau Friday released procedures its examiners will use in identifying consumer harm and risks related to the updates to the Military Lending Act (MLA) rule. Creditors, including credit unions, are required to comply with the amended regulation for most products as of Oct. 3, while credit cards will be covered as of Oct. 3, 2017.

The procedures are meant to outline what the bureau will be looking for during reviews covering the amended MLA regulation. The Department of Defense finalized the changes last year. The guidance will specifically apply to institutions the CFPB examines.

When lending to servicemembers and their dependents, creditors cannot:

  • Charge servicemembers or their covered dependents more than a 36% Military Annual Percentage Rate, which generally includes the following costs (with some exceptions): finance charges, credit insurance premiums or fees, add-on products sold in connection with the credit extended, and other fees such as application or participation fees;
  • Require servicemembers or their covered dependents to submit to mandatory arbitration or give up certain rights under state or federal law, such as the Servicemembers Civil Relief Act; nor
  • Require servicemembers or their covered dependents to create a voluntary military allotment in order to qualify for a loan.

According to the bureau, early examinations will evaluate financial institutions’ compliance management systems and overall efforts to follow the rule’s requirements.

Specifically, examiners will consider an institution’s implementation plan, including actions taken to update policies, procedures, and processes; its training of appropriate staff; and its handling of early implementation challenges.

CUNA has asked the Federal Financial Institutions Examination Council to delay examination of the MLA rule and has requested several compliance clarifications from the NCUA.