100 Days Until the MLA: Compliance Challenges and Open Questions Before the New MLA’s Rule Implementation

Sasha-LeonhardtWith only 100 days until the new Military Lending Act (MLA) rule takes effect on October 3, 2016, many financial institutions have begun enacting procedures to ensure they are compliant with the new regulation by the effective date. With the implementation of this new rule, financial institutions continue to work towards full compliance with the requirements imposed by the Department of Defense (DoD), but there are growing pains. As this deadline draws near, there are several important compliance concerns that financial institutions must keep in mind and a number of issues where the industry is concerned about unclear language.

What types of credit are covered by the new MLA rule?

The 2007 MLA rule was limited to three specific types of products: payday loans, vehicle title loans, and refund anticipation loans. However, under the new rule, the MLA will cover a far broader range of products. The DoD sought to match the definition of credit under the Truth in Lending Act’s (TILA) implementing regulation—Regulation Z—so the new MLA rule will cover any credit that is (i) primarily for personal, family, or household purposes, and (ii) either subject to a finance charge under Regulation Z or payable by written agreement in more than four installments.

However, the new MLA rule excludes four specific types of transactions: Read more…

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FSOC Publishes 2016 Annual Report, Highlights Marketplace Lending as Emerging Risk

On June 21, the Financial Stability Oversight Council (FSOC) released its 2016 annual report. The report reviews financial market and regulatory developments, identifies emerging risks, and offers recommendations to enhance the U.S. financial markets, promote market discipline, and maintain investor confidence. Among other things, the report focuses on threats and vulnerabilities related to cybersecuritry, marketplace lending, and distributed ledger systems/blockchain technology. Addressing the need for heightened cybersecurity, the report advises financial institutions to work together with government agencies to better understand risks associated with destructive malware attacks and to “improve cybersecurity, engage in information sharing efforts, and prepare to respond to, and recover from, a major incident.” Regarding marketplace lending, the report stresses that, as the industry continues to grow, “financial regulators will need to be attentive to signs of erosion in lending standards.” Finally, according to the report, distributed ledger systems pose operational vulnerabilities that “may not become apparent until they are deployed at scale,” and cautions that a “considerable degree of coordination among regulators may be required to effectively identify and address risks associated with distributed ledger systems.”

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Federal Reserve Issues Cease and Desist Order over Bank’s Deposit-Gathering Practice

On June 13, the Federal Reserve issued a cease and desist order to a California-based savings and loan holding company and its wholly-owned, Indiana-based federal savings bank subsidiary. According to the Federal Reserve, between January 8, 2008 and March 5, 2010, the federal savings bank operated a deposit-gathering program (Program) pursuant to which it placed customer funds into deposit accounts at unaffiliated banks (Participating Banks) that had different maturities and different interest rates than those selected by customers under the Program. The Federal Reserve contends that the bank’s deposit-gathering practice was unsafe and unsound, and that the bank “was subject to liquidity risk because customers may have demanded the return of many or all of their deposits before the maturity dates negotiated by [the bank] with the Participating Banks, and/or [the bank] obtained less in interest from deposits at Participating Banks than it owed to customers for the deposit accounts they had selected.” Pursuant to the Federal Reserve’s cease and desist order, the savings and loan holding company and the federal savings bank must: (i) receive written approval from, and (ii) submit a business plan to the Federal Reserve (or the appropriate federal banking agency) prior to engaging in any deposit-gathering program.

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OCC Names Beverly Cole Deputy Comptroller for Compliance Supervision

On June 22, the OCC named Beverly Cole its Deputy Comptroller for Compliance Supervision. Effective July 2016, Cole will serve as the operational executive responsible for developing and promulgating compliance operational protocols, examination strategies, and schedules. Cole started at the OCC in 1979 as an Assistant National Bank Examiner. In 1984, she left the OCC to work in the banking industry, but she returned to the OCC three years later. Throughout her tenure with the OCC, Cole has served in various supervisory roles overseeing banks of all sizes.

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New York Senate Confirms Maria Vullo as Superintendent of NYDFS

On June 15, the New York State Senate confirmed Governor Andrew Cuomo’s nomination of Maria Vullo as Superintendent of the NYDFS. Replacing former Superintendent Benjamin Lawsky, Vullo will be responsible for the regulation of more than 1,500 insurance companies and almost 1,600 banking and other financial institutions. Prior to joining the NYDFS as Acting Superintendent in February 2016, Vullo was a litigation partner in private practice, and formerly served as Executive Deputy Attorney General for Economic Justice Division in the New York AG’s office. Commenting on her role, Vullo noted that she is “committed to strengthening New York’s status as the financial capital of the world, protecting consumers, and ensuring that everyone follows the law.”

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