https://www.bankersonline.com/topstory/156835

We have updated the consolidated Q&A interpretations in our Regulations pages for the MLA rule. Check it out at https://www.bankersonline.com/regulations/32-232-qa.

Questions 2, 17 and 18 were updated, and question 20 was added.

Thanks John.

The refined guidance doesn't answer all the questions, but it certainly helps.

So if I am reading the amendment correctly.....vehicle purchase loan that includes GAP, MBI, or payment protection product in the amount financed, the loan has now become MLA protected and will need the MAPR disclosure

Am I correct?.

Yes, that is what we are reading as well.

I went back and read MLA and it all hinges on the word "expressly", which I think we all skipped over. Now that it applies to vehicle purchases...are dealers going to need to step up to the plate when they pull credit and identify possible MLA covered borrowers? Are dealers just going to send the loan into an indirect pipeline and let the lenders deal with all the MLA requirements? How will dealers know if adding GAP or MBI or both might cause the MAPR to exceed 36%? What are the possible UDAAP concerns when a non-MLA borrower can finance ancillary products, but a MLA covered borrower cannot? This is not going to be an easy fix.

They step up to the plate or when you get the paper and run your own check - you kick it back. It all depends on how you want to manage the dealer relationship. Once the ink hits the paper - the horse is in the back forty headed for the next county.

What are the possible UDAAP concerns when a non-MLA borrower can finance ancillary products, but a MLA covered borrower cannot?

Why can't a covered borrower finance the ancillary products? The MLA does not prohibit it, it simply removes the transaction from being exempt from the MLA requirements.

If an MLA search is ran for all indirect loans and on those with a positive MLA hit we provide stipulations to the dealer that no GAP or Credit Life be added, would this be viewed as a fair lending or UDAAP issue? We indicate stipulations to dealers on the back end very regularly, but up until this point, stipulations have not been based on a borrower's MLA status. Thoughts please.

As far as credit life is concerned, I think we are clear of any fair banking issues since the final rule specifically mentions that the department does not feel a product like credit life would be beneficial for covered borrowers.

"The Department believes that most, if not all, of the credit
insurance products, debt cancellation contracts, or debt suspension agreements
customarily offered to consumers are not suitable for a covered borrower because the
military services already provide insurance or other benefits to a Service member that
would adequately provide financial resources even if an event of coverage (e.g.,
disability) were to occur to the borrower. For example, a Service member currently holds
health insurance as part of his or her benefits in the Service and, if that Service member
were to become ill, the Service member still would be employed, thereby allowing him or
her (or the relevant dependent who relies on the Service member’s income) to continue to
make payments on the debts incurred without triggering a condition of the credit
insurance."

Does anyone have any opinion on not offering GAP to a covered borrower for indirect loans?