Page 3 of 3 1 2 3
Thread Options
#813322 - 09/11/07 09:04 PM Re: New Usury Rates for Servicemembers Andy_Z
ccman Offline
Platinum Poster
Joined: Sep 2007
Posts: 918
Since this law takes effect on Oct. 1st, anyone have any suggestions on how to get to the MAPR? In the prohibitions of the new law, a bank could not take a deposit account of a "covered person" nor could the "covered person" provide an allotment to repay the loan. My question is, doesn't these prohibitions limit the amount of credit availablity to a servicemember? Based upon the discussion here, the banks may have to prepare to comply and treat each request on a case by case basis. Maybe, if enough servicemembers complain about the new law, and the lack of access to credit, the DoD may see the need for some timely revision. (but don't count on it)

Return to Top
Lending to Servicemembers (SCRA, JWNDAA), War, Terrorism
#813340 - 09/11/07 09:26 PM Re: New Usury Rates for Servicemembers ktac MITCH
ktac MITCH Offline
Diamond Poster
ktac MITCH
Joined: May 2005
Posts: 1,813
Giant side of TX
Originally Posted By: ktacMITCH
OK - so payday is still somewhat up in the air. Lets move on
2. Title Loan = Say a customer is trading vehicles and wants to sell their old one theirselves, so we make them a loan secured by the old vehic (previously fee and clear) for 120 days to give them $ for a down payment on the new vehic and time to sell their old one.


Any takers on #2.
And as R. Insley said, what I am trying to do is get us down so that our products do not fall within the definitions and therefore we avoid the "Covered Person" notice as well as the MAPR and everything else.
_________________________
My opinions are just that, and might be worth what you paid for them.

Return to Top
#813426 - 09/12/07 02:57 AM Re: New Usury Rates for Servicemembers ktac MITCH
Jan94 Offline
Platinum Poster
Joined: Mar 2001
Posts: 828
USA
Section 232.3(b)(1)(ii) defines a vehicle title loan as: Closed-end credit with a term of 181 days or fewer that is secured by the title to a motor vehicle, that has been registered for use
on public roads and owned by a covered borrower, other than a purchase money transaction described in paragraph (b)(2)(ii) of this section. Paragraph (b)(2)(ii) provides that the following would not be not meet the definition of "consumer credit": "any credit transaction to finance the purchase or lease of a motor vehicle when the credit is secured by the vehicle being purchased or leased;"

So it would appear in your scenario since your loan would be less than 181 days and is secured by the old car and not the car being purchased, this loan would be a covered loan.

Return to Top
#813564 - 09/12/07 01:37 PM Re: New Usury Rates for Servicemembers Andy_Z
RR Joker Offline
10K Club
RR Joker
Joined: Nov 2002
Posts: 20,654
The Swamp
Our advice is to credit admin is to get to o.oo%. In portfolio review, we don't have but a tiny percentage of loans that come near the definition of covered transactions and we have many branches near military installations. The disclosure is an issue in that you either give it on all consumer loans, or risk inadvertantly missing giving it on the loans that fall within the definitions. It's not a viable risk, IMO. I believe we will amend loan policy to prohibit these loans and offer an alternative credit product instead.

Also, Jack Henry has not developed a MAPR solution and I don't expect it really to be in place by the deadline either.
_________________________
My opinion only. Not legal advice.

Say you'll haunt me - Stone Sour

Return to Top
#813734 - 09/12/07 03:37 PM Re: New Usury Rates for Servicemembers RR Joker
Richard Insley Offline
10K Club
Richard Insley
Joined: Oct 2000
Posts: 10,049
Toano, VA
Originally Posted By: RR joker
The disclosure is an issue in that you either give it on all consumer loans, or risk inadvertantly missing giving it on the loans that fall within the definitions. It's not a viable risk, IMO.
Your risk assessment is right on the mark. I came to the same conclusion, but was influenced even more by the lack of rewards. With a 36% MAPR cap (and the possibility that some of the MFC goes to 3rd parties), small loan amounts, and short terms, I don't see how anyone can make enough money to justify offering covered products.

Have I missed something? Have any BOLers' banks done a feasibility analysis with 36% MAPR and concluded they can earn enough to pay the help and keep the lights on?
_________________________
...gone fishing.

Return to Top
#813783 - 09/12/07 04:00 PM Re: New Usury Rates for Servicemembers Richard Insley
RR Joker Offline
10K Club
RR Joker
Joined: Nov 2002
Posts: 20,654
The Swamp
Richard, we have not actually run the numbers, but I agree with your "mental" assessment regarding same...it makes no sense when there are other types of small credit available that work without the hassle...including in particular, open-end lines.
_________________________
My opinion only. Not legal advice.

Say you'll haunt me - Stone Sour

Return to Top
#813950 - 09/12/07 06:19 PM Re: New Usury Rates for Servicemembers RR Joker
ToTo Offline
Platinum Poster
Joined: Apr 2004
Posts: 595
OZ
FWIW, this is our plan too: not to make any loans that fall within the rule.

Additionally, one other issue that I've been thinking about and would like others' thoughts on is the "assignee" liability. I don't believe "Assignee" is defined in the rule. If you are a commercial bank, and lend to finance companies or other types of lending companies, or other commercial companies that might lend to covered borrowers, are you potentially liable for violations of the rule if you take as collateral for the loan to a finance company, an assignment of loans that might fall within the rule?

Return to Top
#815602 - 09/14/07 05:39 PM Re: New Usury Rates for Servicemembers ToTo
Andy_Z Offline
10K Club
Andy_Z
Joined: Oct 2000
Posts: 27,466
On the Net
ToTo, counsel is your best bet for an answer. But I would believe that if you can end up owning that loan, you would have liability. Holder in Due Course would apply. And yes, if there was a violation, the notes would be worthless plus you'd have the liability of what had been paid already.

As to banks doing these loans, I'd bet some will, but a real minority at best. I say this only because as a military banker (probably for linger than some posters here have been alive) there are loss leader products that are made and products offered that do lose money, but that build good will and help the military bank keep its contract to operate on post/base.

Regardless, it is a training issue that must be addressed.
_________________________
AndyZ CRCM
My opinions are not necessarily my employers.
R+R-R=R+R
Rules and Regs minus Relationships equals Resentment and Rebellion. John Maxwell

Return to Top
Page 3 of 3 1 2 3

Moderator:  Andy_Z