Regulatory Compliance Update April 2016

Regulatory Compliance Update

By: Hickman Beckner, Vice President

February was a significant month for a new regulation governing loans to members of the active duty military.

The Department of Defense has issued the final rules for the Military Lending Act. This law is significant for its protection of service members and for establishing a federal usury limit for loans covered under the Act.

Military Lending Act:

Covered Persons: The Act applies to borrowers that are on active duty in the military. It does not apply to loans made prior to active military service. The rule provides for two methods for determining a Covered Borrower. The borrower’s status can be verified on the DMDC web site or by checking information available on a credit report.

Covered Loans: The Loans covered by the Act include closed-end loans and open-end loans for personal, family, or household purposes. The definition is consistent with Regulation Z. The Act does not cover residential mortgages for purchase, refinance, or home equity loans or lines. The Act does not cover consumer purchase loans such as auto loans.

Military APR: The Military APR (MAPR) for closed-end and open-end credit is the same as the APR calculation under Regulation Z.

Military APR Limit: The MAPR may not exceed 36% for loans to covered persons.

Compliance Date: The final rules generally apply to loans originated on or after October 31, 2016.

Shaw Systems is adding an indicator to Retail for loans that are covered under the act. There are no processing changes required.

Please consult with your compliance department on the requirements of the Military Lending Act.

Significant Dates:

March 22, 2016 – Comments due on interagency regulatory review regarding rules of procedure, safety and soundness, and securities.

March 31, 2016 – Effective date for the CFPB’s interim final amendments to Reg Z for small lenders that operate in rural or underserved areas.

April 4, 2016 – Comments due on FinCEN’s proposed changes for the Currency Transaction Report.

April 25, 2016 – Comments due on the CFPB’s final amendments to Reg Z for small lenders that operate in rural or underserved areas.

Emerging Issues

The Congress was in recess for the President’s Day holiday. There was no new significant legislation introduced that would impact financial services.