MLA Flashcards
MLA vs. the Talent Amendment?
Talent Amendment - Consumer credit transactions occurring before 10/3/2016.
MLA - Consumer Credit transactions on or after 10/3/2016.
Who does MLA protect?
Active duty members of military, spouses and dependents.
What is the primary purpose of MLA?
For covered transactions, limit amount creditor can charge on a loan to the Military Annual Percentage Rate (MAPR) of 36%
What is included under the MAPR?
Interest, fees, charges imposed for credit and credit ancillary products.
Includes charges not included in the finance charge or APR.
How is the MAPR calculated?
Same as the APR generally.
including fees considered finance charges , but also includes fees that normally are left out of an APR calculation but are more directly related to the cost of credit.
ex: application fees, participation fees
What additional protections are afforded under MLA beyond the MAPR?
-Safe harbor from liability for certain procedures that creditors may use to identify covered borrowers.
-Additional written and oral disclosures
-Prohibits certain loan terms (Prepayment penalties, mandatory arbitration clauses, unreasonable notice requirements).
-Restricts loan rollovers, renewals, and refinancings by some types of creditors.
What are covered credit transactions under MLA?
-Consumer credit as defined by reg Z
-Credit cards
-Deposit advance products
-ODLOC
-Certain installment loans (not auto loans)
What is consumer credit?
Credit offered or extended to a covered borrower for personal, family, or household purposes and:
-is subject to a finance charge
-Payable by written agreement in more than for instalments.
What types of credit are excluded by MLA?
-Residential mortgages (includes home equity and construction)
-Secured Motor vehicle credit (RVs, golf carts, scooters are exceptions)
-Secured personal property credit
Who is a covered dependent under MLA?
Spouse
Children under 21 or 23 if enrolled full time in college
Children of any age incapable of self support
What is not considered a creditor under MLA?
Person chartered as a bank, savings association, or credit union
Military welfare society
Service relief society
Under what circumstances would a application fee not be included in the MAPR calculation?
If the fee is for a short term, small amount loan
What is considered a short term small amount loan? (3)
Closed end loan:
-that limits the rate of interest to 36% under a law other than MLA
-Has a maturity term limit that shall not exceed 9 months
-has a fixed application fee limit that may be charged
What Charges must be included in the calculation of the MAPR for both closed-end and open-end credit?
-Periodic rate
-Credit insurance premium or fee, debt cancellation/ suspension fee
-Credit Ancillary product fees
-Finance Charges
-Application fees
-Fees imposed for any participation in any plan for consumer credit
What exception is there to including an application fee in the MAPR?
Application fees do not need to be included if they are charged by a bank when making a short-term, small amount loan. Provided the fee is not charged more than once in a 12 month period.
If the bank charges more than one application fee, the first would be excluded but all subsequent fees would be included in the MAPR.
How is MAPR calculated for Closed End credit?
Same as APR under reg Z with addition of required fees under MLA.
How is MAPR calculated for Open End credit?
Same as rules for calculating APR for a billing cycle in reg Z. With addition of required fees under MLA.
How is MAPR calculated for Open End Credit when there is no Balance during Billing cycle?
Cannot be calculated and as a result the creditor cannot impose any charge or fee during the billing cycle except for a credit participation fee that cannot exceed $100 annually.
Participation fees for credit card accounts are excluded from this yearly limitation.
Can a creditor charge a fee in the following example?
A creditor charges a late fee in accordance with the credit agreement and there is no balance during the billing cycle.
Yes, the creditor may charge the fee regardless of the balance, because a late fee is not among the charges included in the MAPR.
Creditors may impose fees or charges that are excluded from the calculation of the MAPR even if there is no balance.
Open-end credit card accounts generally exclude fees from the MAPR when they are what?
Bona fide and reasonable.
ex: minimum interest charge that is generally disclosed in an account opening table.
Which fees on credit card account are excluded from the Bona Fide fee exception and should be included in the MAPR?
-credit insurance premium or fee
-fee for credit ancillary product
How do you assess if a bona fide fee is reasonable?
The fee must be compared to fees typically imposed by other creditors for the same or similar product.
ex: When assessing a bona fide cash advance
fee, that fee must be compared to fees charged by other creditors for transactions in which consumers receive
extensions of credit in the form of cash or its equivalent. When assessing a foreign transaction fee, that fee may not be compared to a cash advance fee because
the foreign transaction fee involves the service of
exchanging the consumer’s currency for the local currency demanded by a merchant for a good or service, and does not involve the provision
of cash to the consumer.
How to determine if a participation fee is reasonable on a credit card?
Consider benefits provided by the credit card rewards to determine if the fee is reasonable overall.
If the amount of the fee reasonably corresponds
to the credit limit in effect or credit made available when the fee is imposed, to the services offered under the credit card account, or to other factors relating to the credit card account.
ex: Even if other creditors typically charge $100.00 annually for participation in credit card accounts, a $400.00 fee nevertheless may be reasonable if (relative to other accounts carrying participation fees) the credit made available to the covered borrower is significantly higher or additional services or other benefits are offered
under that account.
What is the bona fide fee safe harbor for credit cards?
Fees are reasonable if:
The amount of the fee is less than or equal to an average amount of a fee for the same or a substantially similar product or service charged by five or more creditors
each of whose U.S. credit cards in force is at least $3 billion in an outstanding balance (or at least $3 billion in loans on U.S. credit card accounts initially extended by the creditor) at any time during the three-year period preceding the time such average is computed.
