ALEXANDRIA, Va.–NCUA has sent a letter to credit unions that outlines a change in an interpretive rule for lending to members of the military. The letter comes three weeks after the agency made the change, according to the Regulatory Report, which first reported the letter.
In its letter, the agency notes on Feb. 28 the Department of Defense (DoD) amended its interpretive rule for the Military Lending Act (MLA) regulation, which establishes an interest rate cap of 36% on most consumer loans to military members, among other protections.
According to NCUA, the change withdraws a specific “question and answer” of the revised interpretive rule, issued in 2017, and reverts back to the Q&A from the original interpretive rule, issued in 2016. The change also adds a new Q&A from the original interpretive rule, issued in 2016.
By way of additional background, NCUA said DoD issued the original interpretive rule on Aug. 26, 2016 in the form of questions and answers. On Dec. 14, 2017, NCUA said the DoD issued a second, amended version of the interpretive rule which, among other things, amended Q&A #2.
Examples Provided
“In that amendment, the Department provided examples of the types of financed purchases associated with buying motor vehicles and other personal property that eliminate a transaction’s exemption from MLA coverage, and support other transactions as exempt from MLA coverage,” NCUA stated in its letter, Regulatory Report noted.
The letter states that after issuing the second Q&A #2, the DoD became aware of concerns over the ability of creditors to take a security interest in motor vehicles, leading to the recent action.
“This most recent amended version of the interpretive rule withdraws the answer to Q&A #2 from the 2017 interpretive rule and reverts back to the original Q&A #2 issued in 2016,” NCUA said.
It added that in the latest interpretive rule, the DoD notes that “this amended interpretive rule does not change the regulation implementing the MLA, but merely states the Department’s preexisting interpretations of an existing regulation.” The Department also noted this amendment will allow it to conduct additional analysis on the matters covered in that Q&A, NCUA stated.