Military Lending Act. Yes, It Applies To Your Credit Union

If your credit union isn’t located on a military base, the Military Lending Act (MLA) may not seem like a major regulatory issue affecting your credit union. However, there have been some recent changes made to the MLA ahead of the October 3rd, 2016 compliance date that will affect how you lend to members of the military and their dependents. But let me give you some background information first.
The MLA was originally enacted in 2007 with provisions covering pay day loans, vehicle title loans and tax refund anticipations loans made to members of the military. These loans could not be made with the Military Annual Percentage Rate (MAPR) of over 36%. This rate is calculated differently than the traditional Truth in Lending Act (TILA) APR because it includes the cost of fees and other charges.
Fast forward to 2015 when proposed amendments from the Department of Defense were enacted that expanded the types of credit products that are covered by the 36% cap. The amended Act expanded the definition of consumer credit covered by the Act to include both closed ended and open ended products such as installment loans, private student loans, overdraft lines of credit and unsecured open ended lines of credit in addition to the originally covered pay day loans, vehicle title loans and tax refund anticipation loans.
In addition to the 36% MAPR, lenders must ensure the security agreement or cross collateralization of accounts subject to the MLA do not permit a security interest in funds or other loans consummated prior to the loans subject to the MLA. This can pose a serious problem to most credit unions whose standard security agreement includes both funds deposited and collateral secured in the past and all funds and collateral secured in the future. Under the MLA provisions, only funds and collateral secured in conjunction with the loan covered under the MLA and any future deposits may be included in the security agreement.
So how does a credit union determine if a loan is subject to the MLA provisions? Lenders have been provided a safe harbor for determining if a loan is being extended that is subject to the MLA provisions if the credit union searches the Department of Defense website to ascertain the status of the applicant before them or the lender may rely on a credit report to indicate active duty status. The MLA also applies to any dependents.
The rule does not apply to any loan made to finance the purchase of a vehicle, residential mortgage loans and transactions not covered by Reg Z.
Does your credit union need some assistance developing a plan for MLA compliance? Let CURx help. We understand the operational implications this Act will pose and can help your credit union become compliant prior to the October deadline.

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Potential Clarification on TRID Forms Coming in July

Is your credit union struggling with the Know Before You Owe rules put in place by the CFPB? If so, there may be some light at the end of the tunnel we call TRID compliance. Recently, Director Cordray sent a letter to CUNA and other industry trade groups acknowledging the operational struggles that compliance with the forms has posed. The letter indicated the CFPB is developing a Notice of Proposed Rulemaking that could be released as early as July. Can’t wait for the CFPB to issue clarification? Let CURx help you navigate the Know Before You Owe mortgage disclosure forms.

You can read the full text of the letter posted by CUNA by using the link below.

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Questions on Same Day ACH? Let Us Break it Down for You.


  • ALL RDFI’s MUST participate
  • Transactions NOT eligible for same-day activity
    • IAT’s
    • Individual transactions over $25,000

Phase One: Effective September 23, 2016

  • ACH Credits ONLY
  • Two new same-day processing windows in addition to current processing times
    • Submission deadline 10:30am ET, settlement 1:00pm ET
    • Submission deadline 2:45pm ET, settlement 5:00pm ET
  • Funds availability requirement
    • RDFI’s MUST provide funds to receivers by end of processing day

Effective Entry Date Requirements

  • Identified by using the current day’s date in the Effective Entry Date field in the Company/Batch Header Record
  • Example: Transactions originated on Monday, October 10 that are intended for same-day processing and settlement must have an Effective Date of “161010” in the appropriate field and be submitted to an ACH Operator no later than 2:45pm ET
  • Originated entries MUST meet the submission deadline for same-day ACH processing noted above
    • Same Day Entry Fees apply (currently 5.2 cents per originated same-day entry)
  • Additional optional same-day identification can be used for verification between the ODFI and Originator using the Company Descriptive Date as “SDHHMM”. SD denotes same-day processing intention and “HHMM” denotes either 1:00pm or 5:00 pm.  Ex: SD1300 or THIS IDENTIFICATION METHOD WILL NOT BE RECOGNIZED BY THE ACH OPERATOR.

Return Entry Processing

  • Same-day processing of return entries is at the discretion of the RDFI, even if the return was a same-day entry
  • Same-day return entries are exempt from the same-day entry fee
  • Return rules DO NOT CHANGE
    • A return entry must be processed in such time that it is made available to the ODFI no later than the opening of business on the second banking day following the settlement date of the original entry

Impact to Participants

  • RDFI’s
    • Update internal processing applications and procedures to accommodate same-day entries
    • Update file submission and delivery schedules with their ACH Operator
    • Ensure vendors and processors are prepared to handle same-day transactions, including allowing ample time for testing
  • ODFI’s that DO NOT elect to participate
    • Ensure the appropriate use of the Effective Entry Date to prevent inadvertently originating same-day ACH entries
  • ODFI’s that elect to originate same-day ACH
    • Update internal processing applications and procedures to accommodate same-day entries
    • Update file submission and delivery schedules with their ACH Operator
    • If applicable, talk with Originators to determine if they would like to have the advantage of same day origination and settlement. Discuss appropriate business need, cost effectiveness and the optional use of the Company Descriptive Date.
    • Determine fee schedule, if any, for Originators. Provide new fee notifications in the required amount of time.
  • ALL Financial Institutions should notify the appropriate department of the expected ACH billing changes


Still have questions?

Let our resident ACH experts walk you through them by contacting us today at 1(888) 766-1576.

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New BSA/AML Advisory from FinCEN

FinCEN is out with a new BSA/AML advisory encouraging financial institutions, regardless of size or industry sector, to understand the importance of a culture of compliance. The advisory lists six ways a financial institution can strengthen that culture:

1. The leaders at your institution must actively support and understand compliance efforts.

2. Efforts to manage and mitigate BSA/AML risks must not be compromised by revenue interests.

3. Relevant information from the various departments within the organization should be shared with compliance staff to further BSA/AML efforts.

4. Adequate resources should be devoted to the compliance function.

5. Ensure the compliance program is effective by having it tested by an independent and competent party.

6. Leadership and staff should understand the purpose of BSA/AML efforts and how reporting is used.

You can read the full text of the advisory on FinCEN’s website at

Need assistance putting these principles into practice? Let CURx help.


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NCUA Hosting Free Webinar

The NCUA is hosting a free webinar on March 19th at 2pm to discuss the Bank Secrecy Act and Money Service Businesses.

Diane Rector, Training Manager and Economic Development Specialist Supervisor with NCUA’s Office of Small Credit Union Initiatives, will host Jane Pannier, Esq., Senior Vice President and In-House Counsel for Neighbor Bench, LLC, and Judy Graham, Program Officer with NCUA’s Office of Examination and Insurance.

Topics for discussion will include:

  • Critical elements of a BSA program
  • Money Service Businesses
  • Common BSA violations
  • Reporting requirements

Attendees can also opt to take a test at the end of the training to receive a certificate.

For more information or to register click here.

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Is Your Credit Union Servicing a Marijuana-Related Business?

New guidance is out from the FFIEC to clarify the responsibilities financial institutions have under the BSA when holding accounts for marijuana related businesses. Although federal law prohibits the manufacturing, distributing and dispensing of marijuana, 20 states and D.C. have legalized certain drug related activities. 

If your institution is in a state that allows these activities you may be faced with the decision to open or continue to do business with a marijuana related business. The new guidance states that financial institutions have to assess the risks of providing services to a marijuana related business that includes:

  1. Verifying with the appropriate state authorities whether the business is duly licensed and registered.
  2. Reviewing the license application (and related documentation) submitted by the business for obtaining a state license to operate its marijuana-related business.
  3. Requesting from state licensing and enforcement authorities available information about the business and related parties.
  4. Developing an understanding of the normal and expected activity for the business, including the types of products to be sold and the type of customers to be served (e.g., medical versus recreational customers).
  5. Ongoing monitoring of publicly available sources for adverse information about the business and related parties.
  6. Ongoing monitoring for suspicious activity, including for any of the red flags described in this guidance.
  7. Refreshing information obtained as part of customer due diligence on a periodic basis and commensurate with the risk posed.

A memo issued to federal prosecutors by the Department of Justice Attorney General James Cole in 2013 addressed marijuana enforcement under the Controlled Substances Act. This memo also has implications for credit unions as it lays out the priorities (Cole Memo priorities) that law enforcement will focus their efforts towards. The FFIEC guidance states a financial institution should consider if a marijuana related business implicated one of the Cole priorities. The priorities are:

  1.  Preventing the distribution of marijuana to minors.
  2.  Preventing revenue from the sale of marijuana from going to criminal enterprises, gangs, and cartels.
  3.  Preventing the diversion of marijuana from states where it is legal under state law in some form to other states.
  4.  Preventing state-authorized marijuana activity from being used as a cover or pretext for the trafficking of other illegal drugs or other illegal activity.
  5.  Preventing violence and the use of firearms in the cultivation and distribution of marijuana.
  6. Preventing drugged driving and the exacerbation of other adverse public health consequences associated with marijuana use.
  7. Preventing the growing of marijuana on public lands and the attendant public safety and environmental dangers posed by marijuana production on public lands.
  8. Preventing marijuana possession or use on federal property.

The compliance burden associated with these types of businesses is great. Perhaps we should bring back the slogan “Just Say No!”

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