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#2095221 - 08/25/16 02:33 PM Defense publishing FAQ on MLA regulation Aug. 26.
John Burnett Offline
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The Department of Defense has an "Interpretive rule" for its "Military Lending Act Limitations on Terms of Consumer Credit Extended to Service Members and Dependents" regulation (the MLA regulation at 32 CFR Part 232) queued up for publication tomorrow in the Federal Register.

Here's a link to our Top Story: https://www.bankersonline.com/topstory/152365

The Interpretive rule takes the form of an FAQ.

Click to reveal...

Spoiler Alert: § 232.8(e) of the MLA regulation "does not prohibit covered borrowers from granting a security interest to a creditor in the covered borrower’s checking, savings, or other financial account, provided that it is not otherwise prohibited by applicable law and the creditor complies with the MLA regulation including the limitation on the MAPR to 36 percent." [Question #17]

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Last edited by John Burnett; 08/25/16 02:53 PM.
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Lending to Servicemembers (SCRA, JWNDAA), War, Terrorism
#2095232 - 08/25/16 03:04 PM Re: Defense publishing FAQ on MLA regulation Aug. 26. John Burnett
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That is excellent news!

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#2095241 - 08/25/16 03:12 PM Re: Defense publishing FAQ on MLA regulation Aug. 26. John Burnett
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Wow! With 38 days to spare!
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#2095246 - 08/25/16 03:20 PM Re: Defense publishing FAQ on MLA regulation Aug. 26. John Burnett
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OK
Does question 18 mean that a right of offset is ok?
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#2095248 - 08/25/16 03:24 PM Re: Defense publishing FAQ on MLA regulation Aug. 26. John Burnett
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out of the frying pan...
That's what it looks like to me, but I'm going to run it past counsel.
Last edited by RR Becca; 08/25/16 03:31 PM. Reason: typo
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#2095249 - 08/25/16 03:26 PM Re: Defense publishing FAQ on MLA regulation Aug. 26. John Burnett
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OK
Ok thanks.
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#2095251 - 08/25/16 03:28 PM Re: Defense publishing FAQ on MLA regulation Aug. 26. John Burnett
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No. You can take a statutory security interest. The right to offset is not a statutory security interest. But do check with bank counsel.
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#2095253 - 08/25/16 03:32 PM Re: Defense publishing FAQ on MLA regulation Aug. 26. John Burnett
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OK
Thanks John. So to your reading, the prohibition on the right of offset remains on a loan to a covered borrower?
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#2095256 - 08/25/16 03:36 PM Re: Defense publishing FAQ on MLA regulation Aug. 26. John Burnett
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Good news is looks like CUs can still do share secured loans. Unfortunately I am not seeing them address land loans in here frown

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#2095263 - 08/25/16 03:43 PM Re: Defense publishing FAQ on MLA regulation Aug. 26. John Burnett
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"Thus, for example, a covered borrower ay grant a security interest in funds deposited in a checking, savings, or other financial
account after the extension of credit in an account established in connection with the consumer credit transaction."

Doesn't this still mean that we have to grant the loan first, deposit funds and then secure the funds?

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#2095264 - 08/25/16 03:44 PM Re: Defense publishing FAQ on MLA regulation Aug. 26. John Burnett
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What the heck is a "savings" clause?
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#2095265 - 08/25/16 03:46 PM Re: Defense publishing FAQ on MLA regulation Aug. 26. John Burnett
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CU Lady: I didn't take it that way....i took the language that preceded the part you quoted as meaning the bank could still make a loan secured by a deposit account and that statement just clarified that you could also take funds deposited after the fact.
Last edited by raitchjay; 08/25/16 03:47 PM. Reason: clarify that i'm responding to CU Lady
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#2095268 - 08/25/16 03:53 PM Re: Defense publishing FAQ on MLA regulation Aug. 26. John Burnett
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Raitchjay - Ahhh okay. So you can do a share/cd secured loan as normal, even if funds were in the account prior to the loan. Whew! Loan ops will be happy to hear that!

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#2095269 - 08/25/16 03:53 PM Re: Defense publishing FAQ on MLA regulation Aug. 26. mtngrrl
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"...Somewhere in Middle Americ...
Originally Posted By mtngrrl
What the heck is a "savings" clause?


Looks like you can put the language for covereds and non-covered in the same loan agreement...outing the applicability to one of the groups without voiding the whole thing. I was thinking "savings" as in "not checking."

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#2095270 - 08/25/16 03:54 PM Re: Defense publishing FAQ on MLA regulation Aug. 26. John Burnett
raitchjay Offline
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OK
That's my interpretation anyway; someone else can chime in if they read it differently.
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#2095273 - 08/25/16 04:04 PM Re: Defense publishing FAQ on MLA regulation Aug. 26. John Burnett
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Can someone give me their interpretation of #15? I'm reading that we can still have our arbitration clause in the loan agreement and then just add something to the effect that the arbitration clause doesn't apply to MLA covered loans. Anybody agree or disagree?

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#2095279 - 08/25/16 04:14 PM Re: Defense publishing FAQ on MLA regulation Aug. 26. CompliantOkie
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"...Somewhere in Middle Americ...
That's how I'm reading it, CO. Our "savings clause," I guess.

Can't thank you enough, John, for providing this for us.

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#2095285 - 08/25/16 04:37 PM Re: Defense publishing FAQ on MLA regulation Aug. 26. John Burnett
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Yes--thank you John for being so quick to get this to us!
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#2095312 - 08/25/16 06:03 PM Re: Defense publishing FAQ on MLA regulation Aug. 26. John Burnett
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Thanks for the heads up John!
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#2095313 - 08/25/16 06:08 PM Re: Defense publishing FAQ on MLA regulation Aug. 26. John Burnett
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out of the frying pan...
Thanks, John!
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#2095454 - 08/26/16 01:55 PM Re: Defense publishing FAQ on MLA regulation Aug. 26. raitchjay
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Originally Posted By raitchjay
That's my interpretation anyway; someone else can chime in if they read it differently.

That would be my interpretation as well. The 2nd paragraph on question 17 makes it more confusing then it needs to be.

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#2095495 - 08/26/16 03:32 PM Re: Defense publishing FAQ on MLA regulation Aug. 26. ComplyGuy
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Originally Posted By Compliowa
Originally Posted By raitchjay
That's my interpretation anyway; someone else can chime in if they read it differently.

That would be my interpretation as well. The 2nd paragraph on question 17 makes it more confusing then it needs to be.


And that stupid 2nd paragraph is what I keep coming back to! I really don't understand what it is referring to.

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#2095502 - 08/26/16 03:36 PM Re: Defense publishing FAQ on MLA regulation Aug. 26. John Burnett
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OK
It is kinda stupid--to me it's just saying "you can also take an interest in a CD or other deposit account AFTER the loan consummates".....as if anyone would want to do that. I don't see why that needed any clarification though.
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#2095602 - 08/26/16 07:23 PM Re: Defense publishing FAQ on MLA regulation Aug. 26. John Burnett
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Question #12 'A payment schedule (in the case of closed-end credit) or an account-opening disclosure (in the case of open-end credit) provided pursuant to the requirement to provide Reg Z disclosures satisfies this obligation. Therefore, a creditor may orally provide the information in a payment schedule or an account-opening disclosure to a covered borrower.'

Does this mean if I give the covered borrower the Reg Z disclosures, it will satisfy the oral requirement for payment obligations?? My head is spinning.

Thanks!
Last edited by peony; 08/26/16 07:24 PM.
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#2095608 - 08/26/16 07:37 PM Re: Defense publishing FAQ on MLA regulation Aug. 26. John Burnett
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So on #2 question and answer does this mean that auto purchase loans where it covers not only the new auto but pays off the previous loan where the customer is underwater are now covered products? I am wondering if that falls under the "cash out" definition.

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