The CFPB included a new report with its comment letter to the Department of Defense regarding proposed updates to the Military Lending Act. The report supported the CFPB's position that the tighter lending restrictions proposed by the DoD should be finalized as written.
The proposal included a broader definition of consumer credit that would prevent federal credit unions from making payday alternative loans permitted by an NCUA rule. The proposal would include any credit offered or extended to active-duty military members that has a finance charge or is payable under a written agreement in more than four installments. The proposed rules could be interpreted to include deposit advance products, more types of payday, auto title and installment loans, including open ended products like credit lines.
The CFPB said loopholes in the current Military Lending Act rules have allowed companies to skirt the rule's 36% rate cap and other military-specific credit protections.
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"The current rules under the Military Lending Act are akin to sending a soldier into battle with a flak jacket but no helmet. To give our troops full-cover protection, the rules need to be expanded," CFPB Director Richard Cordray said in a release. "The Department of Defense's proposed revisions will go a long way toward better shielding our military from high-cost credit products."
NCUA Chairman Debbie Matz asked the DoD in her Dec. 19 comment letter to exempt federal credit unions in compliance with current NCUA payday alternative loans from the proposal.
NAFCU President/CEO Dan Berger swung for the fences, asking the DoD in his comment letter to exempt federally insured depository institutions from the entire MLA rule.
"This would follow the intent of the legislation as well as provide servicemembers with greater protections from predatory lenders without adding the extraordinary compliance and regulatory burdens that accompany this proposed rule. An exemption would steer servicemembers and their dependents away from non-depository predatory lenders and into more mainstream consumer credit products," he wrote.
Berger offered compromises, asking at the very least that products like the NCUA's payday alternative loan be exempted from the rule.
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