1. The Military Lending Act – NCUA’s Enforcement and Supervisory Role Defense Credit Union Council Defense Issues 2016
The information contained in this presentation is for informational purposes only and is provided as a public service and in an effort to enhance understanding of the statutes and regulations administered by the NCUA. It expresses the views and opinions of staff of NCUA and is not binding on NCUA or NCUA Board Members. Any representation to the contrary is expressly disclaimed.

2. Agenda Background and Overview 2015 Changes – Old vs. New Prohibitions
Penalties and Civil Liability
Effective Dates
Next Steps
National Credit Union Administration – Defense Issues 2016 Meeting

3. Background and Overview
Talent Amendment, a.k.a. Military Lending Act – 10 U.S.C. § 987
Regulations – 32 C.F.R. Part 232
Amended and published in the Federal Register July 22, 2015, at 80 F.R
National Credit Union Administration – Defense Issues 2016 Meeting

4. Previous Scope
Covered Borrowers: Active duty service members and their dependents
Covered Products:
Payday loans
Vehicle title loans
Refund anticipation loans
National Credit Union Administration – Defense Issues 2016 Meeting

5. Scope After Amendments
Amended regulation issued July 22, 2015
Covered Borrowers: Still active duty servicemembers and their dependents (dependents re-defined)
Covered Products: Expanded to cover TILA credit (with exceptions)
Credit offered or extended to a covered borrower primarily for personal, family, or household purposes, and that is:
(i) subject to a finance charge or
(ii) payable by a written agreement in more than four installments 
National Credit Union Administration – Defense Issues 2016 Meeting

6. Coverage Products not covered Mortgage loans
Loans/credit to purchase a vehicle or personal property if secured by the vehicle or personal property
Business loans/credit
Loans/credit to non-covered borrowers
Other Reg. Z exempt credit – such as federal student loans, over $54,600 for most products, securities, public utility credit, home fuel budget plans
National Credit Union Administration – Defense Issues 2016 Meeting

7. Military APR (MAPR) MAPR to covered borrowers capped at 36 percent
MAPR = APR under Reg. Z plus some excluded items
For PALs, exclude 1 application fee in a rolling 12-months period
Bona fide fees excluded for credit card MAPR
National Credit Union Administration – Defense Issues 2016 Meeting

8. Required Disclosures All TILA/Regulation Z disclosures
Statement of MAPR
Clear description of payment obligation
National Credit Union Administration – Defense Issues 2016 Meeting

9. Identifying Covered Borrower
Credit union can use its own method
Changes to safe harbor provision
Must check before consummation
Must keep record of checking
National Credit Union Administration – Defense Issues 2016 Meeting

10. Covered Transactions PREVIOUS VERSION AMENDED VERSION Applied to:
-Payday loans (“Closed-end credit with a term of 91 days or fewer in which the amount financed does not exceed $2,000”)
-Vehicle title loans
-Tax refund anticipation loans
Applies to:
-Consumer credit covered by TILA/Reg. Z (includes credit card accounts, overdraft credit lines)
Not covered:
-Mortgage loans
-Vehicle/personalty purchase loans secured by the vehicle/personalty purchased
-Non-consumer loans
-Loans to non-covered borrowers
-Other credit exempt under Reg. Z
National Credit Union Administration – Defense Issues 2016 Meeting

11. Covered Borrowers PREVIOUS VERSION AMENDED VERSION
At time credit incurred:
-Active duty A, N, MC, AF, CG (or under call/order >30 days)
-Active Guard/Reserve duty
-Member’s spouse, child (38 USC 101(4)), and person getting >1/2 support from member
-Member of armed services on active duty per title 10, 14, 32 USC (or under call/order >30 days)
-Dependent (per 10 USC 1072(2)(A), (D), (E), (I))
-Coverage ends when member’s service ends
National Credit Union Administration – Defense Issues 2016 Meeting

12. Covered Creditors PREVIOUS VERSION AMENDED VERSION -As per Reg. Z
-As per Reg. Z; and
-Assignee of Reg. Z creditor
National Credit Union Administration – Defense Issues 2016 Meeting

13. Military APR (MAPR) PREVIOUS VERSION AMENDED VERSION
-Capped at 36 percent
-Slightly different, but contrast to APR is of greater significance
-Capped at 36 percent total for closed-end
-Capped at 36 percent for any billing cycle for open-end
National Credit Union Administration – Defense Issues 2016 Meeting

14. Payday Alternative Loans (PALs)
PREVIOUS VERSION
AMENDED VERSION
-No special provision
-Special provision for “short-term, small amount loan” (defined term)
Closed-end loan
36 percent APR cap
Made under federal law, w/<36 percent rate cap for FCU or “insured depository institution” under Fed. Deposit Insur. Act
Made under rule w/ a 9-mo. max. term & numerical fee max.
-One application fee in rolling 12-month period excluded from MAPR
National Credit Union Administration – Defense Issues 2016 Meeting

15. Credit Card Accounts -Not covered
PREVIOUS VERSION
AMENDED VERSION
-Not covered
-Covered – 36 percent MAPR cap in any billing cycle
-MAPR calculated per Reg. Z, but fees for opening, renewing or continuing account are included in MAPR
-No fees allowed in billing cycle with zero balance (except for annual participation fee of <$100)
-Exclude from MAPR all bona fide and reasonable fees (with exception), except fees for credit insurance, debt suspension/cancellation, ancillary product (safe harbor: average of same fee charged by 5 large creditors during previous 3 years)
National Credit Union Administration – Defense Issues 2016 Meeting

16. Covered Borrower Status
PREVIOUS VERSION
AMENDED VERSION
-Borrower signs “covered borrower identification statement”
-If not, creditor may request applicant to provide documents proving status; or
-Creditor may verify through Defense Manpower Data Center database
-Any method is permissible
-Safe harbor if creditor verifies through Defense Manpower Data Center database, or verifies through consumer report from nationwide consumer reporting agency or reseller
-Recordkeeping required
National Credit Union Administration – Defense Issues 2016 Meeting

17. Disclosures -MAPR (“X%”) and total dollar amount of MAPR charges
PREVIOUS VERSION
AMENDED VERSION
-MAPR (“X%”) and total dollar amount of MAPR charges
-TILA/Reg. Z disclosures
-Description of payment obligation (payment schedule suffices)
-Statement of rights
-Written and oral (TILA/Reg. Z written only)
-Statement of MAPR (model statement)
-Reg. Z disclosures
-Description of payment obligation (payment schedule for closed-end and account opening disclosures for open-end)
-Written and oral (Reg. Z written only); oral can be in person or by toll-free number
National Credit Union Administration – Defense Issues 2016 Meeting

18. Model Statement of MAPR
Federal law provides important protections to members of the Armed Forces and their dependents relating to extensions of consumer credit. In general, the cost of consumer credit to a member of the Armed Forces and his or her dependent may not exceed an annual percentage rate of 36 percent. This rate must include, as applicable to the credit transaction or account: The costs associated with credit insurance premiums; fees for ancillary products sold in connection with the credit transaction; any application fee charged (other than certain application fees for specified credit transactions or accounts); and any participation fee charged (other than certain participation fees for a credit card account) (c)(3).
National Credit Union Administration – Defense Issues 2016 Meeting

19. Limitations PREVIOUS VERSION AMENDED VERSION
-No rollovers/renewals with proceeds from other credit extended by same creditor, unless under terms more favorable to borrower
-Creditor cannot require allotment
-Rollover/renewal prohibition not applicable to chartered/licensed bank, savings association or credit union (“more favorable terms” exception to rollover/renewal eliminated)
-Allotment prohibition not applicable to military welfare society or service relief society
-Creditor (other than chartered/licensed bank, savings association or credit union) cannot use title of vehicle as security
National Credit Union Administration – Defense Issues 2016 Meeting

20. Retained Prohibitions
Waiver of rights under federal or state law
Includes Servicemembers Civil Relief Act
Mandatory arbitration
Unreasonable notice requirement before borrower brings an action
Onerous legal notice provision
Prepayment prohibition or penalty
Use of allotment to repay the obligation (new exceptions)
National Credit Union Administration – Defense Issues 2016 Meeting

21. Retained Prohibitions (cont’d)
Use of check or other means to access a borrower’s account
Exceptions if MAPR less than 36 percent:
Credit union can require electronic fund transfer to pay, unless prohibited by law;
Credit union can require direct deposit, unless prohibited by law; or
Credit union can take a security interest in borrowed funds deposited into an account established in connection with the consumer credit extension, unless prohibited by law.
National Credit Union Administration – Defense Issues 2016 Meeting

22. Penalties and Enforcement
Knowing violation is misdemeanor
Up to one year in prison; and
Fine
Administrative enforcement as under TILA
National Credit Union Administration – Defense Issues 2016 Meeting

23. Civil Remedies Actual damages but not less than $500
Appropriate punitive damages
Equitable relief (including injunction)
Costs and reasonable attorney fees
Any other relief permitted by law
Must bring action within two years of discovery and not later than five years from violation
National Credit Union Administration – Defense Issues 2016 Meeting

24. Civil Remedies Defense: Act was not intentional; and
Bona fide error, despite process in place reasonably adopted to prevent such errors (error of law not a defense)
National Credit Union Administration – Defense Issues 2016 Meeting

25. Effective Dates
Changes have several effective dates – generally, October 1, 2015
Compliance with new provisions required starting October 3, 2016
Change in safe harbor for identifying covered borrowers effective October 3, 2016
Credit card provisions effective October 3, 2017
Civil liability provisions effective October 1, 2015
Apply to transactions from January 2, 2013, to present
National Credit Union Administration – Defense Issues 2016 Meeting

26. Next Steps
NCUA will issue a second Regulatory Alert with a detailed discussion of the revised MLA regulatory provisions
NCUA staff is drafting examination procedures
National Credit Union Administration – Defense Issues 2016 Meeting

27. Contact Information
Matt Biliouris
Jamie Goodson
Joe Goldberg
Office of Consumer Protection, Division of Consumer Compliance Policy and Outreach
National Credit Union Administration – Defense Issues 2016 Meeting