Compliance with the revised Department of Defense (“DoD”) regulations under the Military Lending Act (“MLA”) is not mandatory until October 3, 2016 or, for most credit cards, until October 3, 2017. However, as the recent implementation of the Dodd-Frank Act mortgage regulations shows, a year or even two can pass quickly. Therefore, institutions should begin planning now. The following are answers to three key questions that can help you start the planning process.
- Which products will be covered by the revised MLA regulations?
The revised MLA regulations apply far beyond the narrow range of small dollar loan products covered today. Instead, reflecting the DoD’s desire to match to the definition of consumer credit under the Truth in Lending Act’s Regulation Z, the MLA regulations will apply to credit offered or extended to a covered borrower that is:
- Primarily for personal, family, or household purposes; and
- Either subject to a finance charge or payable by a written agreement in more than four installments.
However, the following types of credit are excluded:
- Residential mortgages: Transactions secured by an interest in a dwelling, including a transaction to finance the purchase or initial construction of the dwelling.
- Secured motor vehicle purchase loans: Transactions that are expressly intended to finance the purchase of a motor vehicle and are secured by that vehicle.
- Secured personal property purchase loans: Transactions that are expressly intended to finance the purchase of personal property and are secured by that property.
- TILA-exempt transactions: Transactions that are exempt from Regulation Z (other than pursuant to a State exemption under 12 CFR § 1026.29) or otherwise not subject to disclosure requirements under Regulation Z.
Accordingly, the revised MLA regulations should not affect most mortgage, auto, or commercial lending. The new regulations will, however, apply to most credit card accounts, overdraft or personal lines of credit, unsecured closed-end loans, and deposit advance products. Therefore, institutions should focus on preparing the lines of business responsible for these products for compliance with the revised MLA regulations. Read more…