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#2095612 - 08/26/16 07:39 PM
Re: Defense publishing FAQ on MLA regulation Aug. 26.
peony
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Gold Star
Joined: Apr 2013
Posts: 420
VA
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That is not how I interpret this question.
You provide the TIL disclosure which takes care of the written requirements, then you explain the disclosures to the customer orally to satisfy the oral requirement.
Last edited by NSF; 08/26/16 07:40 PM. Reason: This is a reply to peony
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#2095687 - 08/29/16 01:03 PM
Re: Defense publishing FAQ on MLA regulation Aug. 26.
Minion
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Diamond Poster
Joined: Mar 2006
Posts: 1,323
"...Somewhere in Middle Americ...
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That's how I read it, too. If you finance the purchase only....exception. Financing the underwater part of the last car or even refinancing a car loan are now covered products.
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#2095866 - 08/29/16 07:55 PM
Re: Defense publishing FAQ on MLA regulation Aug. 26.
John Burnett
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100 Club
Joined: Jan 2013
Posts: 169
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This new "hybrid purchase money" concept is a major shift! I was looking forward to updated guidance only to see this and realize this has created another issue. The interpretive rule indicates that if a creditor extends credit in an amount greater than the purchase price then this would not be included under the exemption for purchase money loans. What??? How does this impact underwater trade-in, car warranties, etc.? I would think this would have a major impact on the indirect auto side as most I have seen initially determined this would not be applicable. Any thoughts?
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#2095952 - 08/30/16 01:07 PM
Re: Defense publishing FAQ on MLA regulation Aug. 26.
John Burnett
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100 Club
Joined: Jan 2013
Posts: 169
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Add to that we are a month away from the effective date and just now getting this new interpretation. I have yet to see any major discussions from the indirect auto industry, but I have to think that this is all still being digested and many are still unaware of this recent shift.
Minion, have you thought about how you will be addressing this on the indirect auto side?
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#2096022 - 08/30/16 03:56 PM
Re: Defense publishing FAQ on MLA regulation Aug. 26.
John Burnett
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10K Club
Joined: Oct 2000
Posts: 27,754
On the Net
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New car sales price $10,000
Trade-in Value $3,000 Trade-in payoff $3,500
Requested financing $10,500
If that is the scenario you are discussing than the rule makes sense because the applicant has negative equity currently and will have negative equity as a result of the new loan and they are no better off. I can see that the spirit of the MLA works there because the DoD wants the SMs protected, especially from shady deals.
Personally, my experience with the used car market would indicate some dealers just up the purchase price to cover trade-in. Depending on how the bank values the collateral it may or may not work.
All that said, guidance is needed on the guidance as to what constitutes "additional financing that is unrelated to the purchase." The trade-in is obviously related to the deal, albeit in a negative way, but so are warranties which are often purchased with a sale. But read conservatively the loan amount would be greater than the purchase price and that may be an inhibitor here.
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#2096060 - 08/30/16 04:54 PM
Re: Defense publishing FAQ on MLA regulation Aug. 26.
John Burnett
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Member
Joined: Jul 2016
Posts: 73
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I wasn't putting much thought into our indirect dealer loans as I figured purchase $$--not covered...but now...
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#2096229 - 08/31/16 12:50 PM
Re: Defense publishing FAQ on MLA regulation Aug. 26.
John Burnett
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Power Poster
Joined: Sep 2004
Posts: 5,249
out of the frying pan...
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Our state has an up-front "title tax" that is a lump sum due at the time of purchase whether the car is bought from a dealer or from a private individual. Would financing that tax amount (or any other dealer fees, etc.) in addition to the base purchase amount meet that 'cash out' scenario and kick a loan out of the purchase exemption?
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#2096235 - 08/31/16 01:13 PM
Re: Defense publishing FAQ on MLA regulation Aug. 26.
John Burnett
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Platinum Poster
Joined: Jul 2015
Posts: 542
Gorham, ME
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So, overdraft products are excluded from MLA?
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#2096261 - 08/31/16 02:22 PM
Re: Defense publishing FAQ on MLA regulation Aug. 26.
John Burnett
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New Poster
Joined: Oct 2013
Posts: 23
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1. Does anyone have a generalized oral disclosure they'd be willing to share? 2. Consumer credit states "more than 4 installments". Does this mean 12M single pay loans would not be a covered loan?
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#2096338 - 08/31/16 05:39 PM
Re: Defense publishing FAQ on MLA regulation Aug. 26.
John Burnett
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Joined: Sep 2011
Posts: 1,648
A CU, Where Regs Don't Apply
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Tracey, it depends on what type of overdraft product. If it's line of credit product, you may not be off the hook. Other types of arrangements appear to safe though.
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#2096360 - 08/31/16 06:29 PM
Re: Defense publishing FAQ on MLA regulation Aug. 26.
John Burnett
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Gold Star
Joined: May 2015
Posts: 288
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What about a processing fee on a vehicle purchase loan? Purchase price is 10,000 and bank charges a $100 processing fee on all consumer loans. The fee is financed and it is now $10,100. Is it now a covered loan?
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#2096379 - 08/31/16 07:05 PM
Re: Defense publishing FAQ on MLA regulation Aug. 26.
John Burnett
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Joined: Sep 2011
Posts: 1,648
A CU, Where Regs Don't Apply
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That's how it's reading to me! I certainly hope that's not the intent, I'd love to be wrong on that.
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#2096389 - 08/31/16 07:18 PM
Re: Defense publishing FAQ on MLA regulation Aug. 26.
John Burnett
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Power Poster
Joined: Oct 2009
Posts: 9,108
OK
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So what is the consensus on this: if borrower wants $20,000 to purchase new car, and wants to finance fees such that the loan amount is $20,500...covered loan? I'm seeing lots of us with similar questions on this and we need to get it figured out i guess.
Last edited by raitchjay; 08/31/16 07:19 PM.
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#2096395 - 08/31/16 07:23 PM
Re: Defense publishing FAQ on MLA regulation Aug. 26.
John Burnett
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Power Poster
Joined: Oct 2009
Posts: 9,108
OK
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I mean.....my thought on all of these ones like this is that they would be covered loans......the loan amount would exceed the purchase price. I guess i'm just hoping for someone to say that's not right.
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#2096411 - 08/31/16 07:41 PM
Re: Defense publishing FAQ on MLA regulation Aug. 26.
John Burnett
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Gold Star
Joined: May 2015
Posts: 288
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I think I'm with you, Okie. I can't imagine that the intent is that if you charge a loan fee the loan is no longer exempt. I'm with you that a loan fee, or title fee, is not "unrelated to the purchase."
We have training scheduled next week. Hopefully I don't have to tell the lenders every loan is covered unless it is secured by a dwelling (due to our charging a loan fee).
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#2096412 - 08/31/16 07:42 PM
Re: Defense publishing FAQ on MLA regulation Aug. 26.
CompliantOkie
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Power Poster
Joined: Aug 2001
Posts: 7,351
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2. Consumer credit states "more than 4 installments". Does this mean 12M single pay loans would not be a covered loan? Read the whole sentence....it's an "or" scenario. *more than four installments OR *subject to a finance charge Single pay notes are subject to a finance charge.
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#2096414 - 08/31/16 07:47 PM
Re: Defense publishing FAQ on MLA regulation Aug. 26.
ComplyGuy
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Power Poster
Joined: Oct 2009
Posts: 9,108
OK
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I think I'm with you, Okie. I can't imagine that the intent is that if you charge a loan fee the loan is no longer exempt. I'm with you that a loan fee, or title fee, is not "unrelated to the purchase."
We have training scheduled next week. Hopefully I don't have to tell the lenders every loan is covered unless it is secured by a dwelling (due to our charging a loan fee).
First, i hope you're right...but it's not the "charging" of a fee...it's the financing of the fee that i'm concerned about. I mean....you could always tell the borrower they have to pay bank fees in cash.
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#2096415 - 08/31/16 07:49 PM
Re: Defense publishing FAQ on MLA regulation Aug. 26.
CompliantOkie
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Power Poster
Joined: Sep 2004
Posts: 5,249
out of the frying pan...
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I think they intend for those scenarios to be excluded but it's ambiguous in the rule. In the FAQ they mention "cash advance" and " cash out" regarding these hybrid loans and go on to reason that the cash out is not related to the purchase. I think we can make the case that these are not cash out or cash advance loans and they are made related to the purchase. That's my opinion anyway. I'll be recommending to the CO that we exclude those types of loans.
Now if we have a purchase and the loan amount will be used to purchase AND give cash to the customer, we will not exclude those loans. That makes sense to me. So we are leaning toward: $12,000 cash price + dealer fees + state tax + bank fees = $14,500 loan amount EXEMPT $12,000 cash price + dealer fees + state tax + bank fees + $2000 negative equity = $16,500 NOT EXEMPT That sound right?
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