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Comments Requested by the Department of Defense

Comments Requested by the
Department of Defense

You have a real opportunity to make a difference. Comments from the industry will help determine whether institutions will need to put the brakes on lending to servicemembers and their families, or will be able to move full speed ahead to service those credit needs, free from unduly burdensome regulation. You'll have 60 days from April 11, 2007 to submit a comment letter. Let your voice be heard!

Questions posed in the proposal
The DoD specifically requests comment on the following questions:

QUESTION 1: Should the final regulation exclude regulated banks, credit unions and savings associations and their subsidiaries from coverage by the regulation generally, or in limited circumstances such as in the following circumstances:

  1. the depository institutions are subject to supervision and regulation by a federal regulatory agency;
  2. the institution extends covered "consumer credit";
  3. the extension of consumer credit by the institution is subject to supervisory guidance by the federal bank regulatory agency that addresses consumer protection, disclosure, and safety and soundness criteria applicable to such lending; and
  4. the federal bank regulatory agency agrees to act on matters referred to it by the DoD concerning complaints that such lending to a covered member may be inconsistent with the supervisory guidance, applicable law, or is having an adverse effect on military readiness. Would depository institutions find an exclusion that is limited in this manner useful?


QUESTION 2: Do the duration limit and monetary limit on the amount of the loan included in the definition of payday lending create any unintended consequences for other credit products?

QUESTION 3: Do the limits established for vehicle title loans for duration of the loan (included as part of the definition of vehicle loan) cause any unintended consequences for other credit products?

QUESTION 4: Please comment on regulatory approaches that would encourage creditors to offer affordable, small-dollar, short-term loans to Service members and their dependents. For example, should transactions that would otherwise be covered as payday loans be exempt from coverage under these rules if the MAPR is less than 24% MAPR or some other rate specified in the rules? Would a similar rule be appropriate for vehicle title loans or tax refund anticipation loans? Are there other approaches that DoD should consider?

QUESTION 5: Certain fees (such as for unanticipated late payments, default, delinquency or a similar occurrence) that are imposed as a result of contingent events that may occur after the loan is consummated are not included in the computation of the maximum 36% MAPR cap. Are there other fees that should be expressly excluded for the same reason?

QUESTION 6: Please comment on the creditor's involvement in tax filing aspects of a refund anticipation loan.

QUESTION 7: Please comment on the proposed "safe harbor" concept and the methodology proposed to implement the intended balance in approach to identification.

QUESTION 8: Does the proposed rule for providing certain disclosures orally adequately address the compliance difficulties associated with the statutory requirements for oral disclosures, or is another approach more appropriate?

QUESTION 9: Please comment on the potential confusion (if you believe there is any) of the disclosure of two annual percentage rates (the MAPR required by this regulation and the APR required by TILA.)

QUESTION 10: Can or should the DoD adopt the approach of including a limited exception for workout loans and other refinancings that may benefit the borrower to the statutory prohibition that prohibits a creditor from extending consumer credit to a covered borrower in order to roll over, renew, or refinance consumer credit that was previously extended by the same creditor to the same covered borrower?

QUESTION 11: If the above approach (the limited exception) is adopted, can (or should) DoD also adopt a rule clarifying that refinancings or renewals of a covered loan require new disclosures under Section 232.6 only when the transaction would also be considered a new transaction that requires TILA disclosures?

QUESTION 12: Please comment on the rule not applying when the same creditor extends consumer credit to a covered borrower to refinance or renew an extension of credit not covered by Part 232 because the consumer was not a covered borrower at the time of the original transaction. And, if such transactions were to be covered, should the disclosures in Section 232.6 be required for transactions also deemed to be transactions requiring new disclosures under TILA?

QUESTION 13: The law makes it unlawful for a creditor to extend consumer credit to a covered borrower if the creditor imposes "onerous legal notice provisions." What particular legal notice provisions should be considered onerous?

QUESTION 14: A creditor may not demand "unreasonable notice" from the covered borrower as a condition for legal action. What particular notice requirements should be considered unreasonable?

QUESTION 15: Section 232.8(a)(5) of the proposed rule provides an exemption to use EFTs to repay a consumer credit, require direct deposit of the consumer's salary as a condition or eligibility for consumer credit, or take a security interest in funds deposited after the extension of credit. This exemption is made with the recognition that it cannot conflict with other applicable statutes governing the use of EFTs, savings and direct deposits. Can (or should) the DoD adopt the proposed exemption?

QUESTION 16: Creditors are prohibited from charging a prepayment penalty to covered borrowers. The term "prepayment penalty" is not defined in the proposed reg, but will instead be governed by other existing state and federal laws. What do you think about that approach?

QUESTION 17: How should DoD attempt to ensure uniform implementation of, and compliance with, the statute by creditors that are not subject to oversight by federal bank, thrift and credit union regulatory agencies?

QUESTION 18: The plan is for the final rules to be published on or before September 1, 2007 and to take effect October 1, 2007. How do you feel about that timing? Comment on the ability of covered creditors to comply with the proposed rules by October 1 in light of the specific credit products that would be covered by the rules.

HOW TO COMMENT: Submit comments with the docket number or Regulatory Information Number (RIN) through any of the following:

  • Online, through the Federal eRulemaking Portal: http://www.regulations.gov

  • Mail to Federal Docket Management System Office, 1160 Defense Pentagon, Washington, D.C. 20301--1160

The docket number and RIN will be included in the Federal Register version of the reg, published 4/11/07. You'll be able to find a link beginning 4/11/07 on the BankersOnline Top Stories page.

First published on BankersOnline.com 4/10/07

First published on 04/10/2007

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