The October 3, 2017 mandatory compliance date for the Department of Defense’s Military Lending Act (MLA) final rule relating to credit card accounts will soon be upon us. And we know credit unions may have questions on how to comply with the MLA for credit card accounts, LOANLINER® Compliance Solutions offers the following information on their credit card document solution.
The aspects of the MLA final rule that apply to open- and closed-end consumer loans also apply to credit card accounts. Credit unions must provide the same three written disclosures: (1) a statement regarding the Military Annual Percentage Rate (MAPR); (2) a clear description of the payment obligation; and (3) the disclosures required by the Truth in Lending Act and Regulation Z. In addition, the MAPR statement and the description of the payment obligation must be provided orally. Credit unions can comply with the oral disclosure requirement by providing a toll-free telephone number the covered borrower may call to receive the oral disclosures.
The MLA final rule also prohibits certain contract terms for consumer loans and credit card accounts, including mandatory arbitration, mandatory waivers of rights afforded by state or federal law, requiring an allotment to repay the obligation, and imposing a prepayment penalty. In addition, the MLA final rule allows credit unions to take a security interest in funds deposited after the extension of credit in an account established about the consumer credit transaction, rather than allowing a broad security interest in all the member’s shares or deposits.
The LOANLINER credit card document suite has been enhanced to ensure the MLA disclosure requirements are met, and that the documents otherwise comply with the MLA final rule. LOANLINER offers an integrated document solution that allows credit unions to use the same credit card documents for all members, including covered borrowers under the MLA. In this respect, the credit card document solution does differ from LOANLINER’s consumer lending document solution, as the existing LOANLINER credit card documents did not require the same modifications to existing contract terms to ensure MLA compliance. For example, the LOANLINER consumer lending documents contain a waiver of the member’s right to receive notice of the credit union’s demand for immediate payment of an obligation in default. As this waiver, cannot be included in an agreement with an MLA covered borrower, a separate consumer lending agreement for covered borrowers is offered. In contrast, the LOANLINER credit card documents do not contain this waiver or other terms prohibited by the MLA final rule.