[kowsley]

Below are the two questions received from our second CMG session this week that were unable to be answered due to time limitations:

1. Let’s start the day with a question. Does the MLA supercede the Tallent Amendment? In other words if we are compliant with the MLA are we automatically complliant with the Tallent Amendment? Thanks

2. Is indirect lending covered by MLA? Give the Hybrid Transaction FAQ, does that preclude the bank from financing add ons such as warranties?

[kowsley]

Answer #1: Does the MLA supercede the Talent Amendment? The Military Lending Act has gone by several names in the past – John Warner National Defense Act (JWNDAA) as well as the Talent Amentdment. In essence, they are one and the same. The original regulation went into effect on October 1, 2007 and these latest provisions released by the DOD will go into effect on October 3, 2016, with the exception of credit cards which will be October 3, 2017.

Answer #2: Yes, any type of consumer credit to a covered borrower could be covered under MLA, unless it meets an exception. An indirect lending transaction may meet the exception, if the transaction is an auto-purchase loan and the auto being purchased is held as collateral by the bank. With respect to MLA Question #2 – Hybrid Transaction this is currently just referring to the purchase of personal property, not auto-purchases. If the additional funds are going to go towards financing something related to the purchase, i.e. taxes, tags, etc. it is acceptable and is not considered “cash out” to the borrower. Notice on page 6 of the manual, third bullet: A hybrid purchase money and cash advance loan is not expressly intended to finance the purchase of personal property, because the loan provides additional financing that is unrelated to the purchase.

[cowen]

I have a different scenario. We have a loan that is consumer purpose that is available online. The decision is made using account history or a credit report. It’s an automated process. I contend that this is a covered product. However, there’s a debate going on with a vendor: They are saying that as long as a loan “falls below the 36% rate cap, you don’t have to do covered borrower lookups.”

According to the regulation, there are very specific exceptions to the rule. If a loan is consumer purpose, and is not any of the exceptions noted in i-iv, wouldn’t you have to verify if an applicant is a covered borrower before you could determine if MLA applied? Where is there an exception for loans that “fall below 36%”?

[Author]

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