Laws that impact lending to servicemembers include the Military Lending Act and the Servicemembers Civil Relief Act. Both laws have been recently amended. Both sets of amendments bring clarity to areas of uncertainty.
In response to these recent changes all creditors need to update their compliance management systems. Changes to policies, procedures, audit and training are needed to assure continued compliance. The revisions are already effective.
Servicemembers Civil Relief Act (SCRA)
On December 12, 2017 the National Defense Authorization Act for Fiscal Year 2018 (H.R. 2810) (NDAA) was signed into law. Section 557 of the NDAA extends for two years, until December 31, 2019, the temporary provisions contained in the § 303(b) and (c) of the Servicemembers Civil Relief Act (50 U.S.C. § 3953). The provisions provide the protections in § 303 to servicemembers during periods of active duty and for a period of time after active duty. The temporary provisions extend the protection period after active duty from 90 days to one year. The current version of the HUD-SCRA delinquency notice for past-due mortgage payments remains viable for the next two years. The current notice has a December 31, 2017 expiration date. HUD should release a new version of the form, with the same wording and a revised expiration date, in the near future.
Military Lending Act (MLA)
On December 14, 2017 the Department of Defense (DoD) published some much needed clarification on the Military Lending Act (MLA). Previous DoD interpretations, in the form of 19 Questions and Answers published during August 2016, provided less than sufficient answers to certain questions.
The new guidance eliminates much of the confusion by amending three of the questions and by providing one additional question and answer.
- Question 2 is amended to clarify that loans to purchase motor vehicles or other personal property qualify for an exemption from the MLA when related items such as warranties are added to the loan.
- Question 17 is revised to provide assurances that a creditor can take a security interest in checking, savings, or other financial accounts by describing a permissible security interest granted by covered borrowers.
- Questions 18 now clearly allows creditors to exercise the right to take a security interest in funds deposited into a covered borrower’s account in connection with all types of consumer credit covered by the MLA regulation, including credit card accounts, provided this is not otherwise prohibited.
- New Question 20 addresses safe harbor qualifications for remotely created checks.
The revisions to the SCRA and the MLA result in the need to update policies, operating and audit procedures and training of key employees. Compliance Resource is offering a training program that focuses on the revisions. The program reviews the changes in detail and also provides a review of the existing requirements of the MLA and SCRA. Information about the two-hour webinar, which is scheduled for January 16, 2018, is available at: https://www.jackscomplianceresource.com/event-registration/?ee=165
More information about the revisions is available at: https://www.jackscomplianceresource.com/mla-guidance-published/