The Consumer Financial Protection Bureau (“CFPB”) issued updated examination procedures it will use to assess lender compliance with the Military Lending Act rule (“MLA”). The MLA rule was amended in 2015 and the new requirements for lines of credit, installment loans, and deposit advances go into effect on October 3, 2016. Credit card issuers have a later compliance date of October 3, 2017. The MLA applies to active duty servicemembers and covered dependents. The amendment expands the types of products covered by the MLA, requiring enhanced disclosures, and restricting loan terms and refinancing options. Lenders may not charge covered servicemembers more than 36% interest, require waivers of consumer protection laws, and they may not require mandatory allotments to qualify for a loan.
The examinations will be compliance-heavy and focus on management systems, policies and procedures, training, and implementation. They will look at how a lender identifies covered borrowers, the reliability of an institution’s internal controls for monitoring compliance, and review an institution’s corrective action plan when a violation is identified. The examination procedures themselves include flow charts and checklists that lenders may find helpful as they review their MLA compliance.