The League – Fostering Financial Wellbeing for All

Forms Update: Use League’s MLA forms for Servicemembers and their dependents starting October 3rd

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The League is now releasing Military Lending Act (“MLA”) versions of six WCUL loan documents. Each appropriate form will be emailed in the next few business days at no charge to credit unions that have a current (2016) subscription to the corresponding existing WCUL loan form. 

The MLA forms are designed for loans to military service members and their dependents with loans closed on or after October 3, 2016, when updated regulations take effect.

(The links below provide final proofs of the MLA forms.) 

The MLA forms listed above include MLA disclosures in the loan agreements and/or the Truth-in-Lending Disclosures. Text has also been revised to avoid prohibited terms such as prepayment penalties, security interests in deposits or shares (including both pledges and set-off), and waivers of borrowers’ rights to legal recourse. WCUL form subscribers will continue to use the standard versions of the forms for loans to those who are not “covered borrowers.” (You wouldn’t want to give up setoff and other rights for all your borrowers.) 

Contents

Military Lending Act overview
Disclosures 
Limitations 
Descriptions of changes

  • MLA Consumer Note and Federal TIL Disclosures (#82014-MLA). 
  • MLA Consumer Kwik-Cash Loan Agreement (#82033-MLA). 
  • MLA Consumer Note (#82073-MLA). 
  • MLA Chattel Security Agreement (#82005-MLA). 
  • MLA Federal TIL Disclosures (Personal) (#82057-MLA). 
  • MLA Non-Consumer Note (#82031-MLA). 

Use of WCUL fillable .pdf forms
Important reminders 

Military Lending Act overview 

On July 22, 2015, the U.S. Department of Defense published its final rule amending 32 CFR 232, the implementing regulation of the MLA. The amended MLA regulation affects all credit unions that extend consumer credit, as defined in the rule, to members of the U.S. armed forces on active duty and their dependents (“covered borrowers”) as of October 3, 2016. The compliance date for credit card accounts is October 3, 2017, unless the Secretary of Defense provides an additional extension of up to one year. The Department of Defense estimates that 238 million transactions each year will be subject to the disclosure requirements of the regulation. 

The updated MLA rules apply to many more loans than existing MLA rules, and are certain to affect every credit union. The amended regulation expands coverage of the MLA requirements to all consumer credit to covered borrowers, except for loans secured by a residence (including purchases, initial construction, refinances, home equity loans and lines of credit, and reverse mortgages) and purchase money loans secured by motor vehicles or personal property. The MLA does not apply to loans excluded from Reg. Z, such as loans to an organization or for a primarily business purpose. 

The regulation prohibits a military annual percentage rate (MAPR) greater than 36 percent and limits certain practices and loan terms in connection with extensions of consumer credit to covered borrowers. Additionally, the regulation requires creditors to provide certain written and oral disclosures to covered borrowers. 

The MAPR is not the same as the APR. The MAPR includes virtually any fees assessed in connection with the transaction or for credit-related products or services, including fees that are not “finance charges” under Reg. Z. For open-end credit, the MLA rules require lenders to calculate the MAPR following the rules for calculating the “effective APR” for a billing cycle. But no MAPR figure is included in the loan agreement or disclosures.  

Every credit union must be prepared to comply. For example, if a covered borrower gets a signature loan, non-purchase auto loan, or a Kwik-Cash loan from a credit union on or after October 3 of this year, the MLA will apply. Loan rates, fees, oral and written disclosures, and contract terms must comply. 

Prudent change management is imperative to prepare for timely compliance with the new regulatory requirements. Credit unions need to ensure that their processes and systems are sufficient to identify covered borrowers and loan products, accurately calculate the MAPR, provide required disclosures, and incorporate other required limitations and protections. Many credit unions rely on software, automated tools, disclosure forms, and other third-party relationships to process loan applications, create and distribute disclosures, underwrite loans, and close loans. Credit unions need to manage their third-party relationships to ensure that operational and compliance risks associated with the regulatory amendments are addressed appropriately. 

For essential information on the MLA requirements, see ii Release No. B067 – Lending to Servicemembers and the February 25, 2016 Compliance Courier: Military Lending Act ii Release rewritten to explain broad new rules. The remainder of this Compliance Courier will focus on the forms. 

Disclosures 

For any credit subject to the MLA rules (including credit originated online), the credit union must provide special disclosures to the covered borrower. Under the MLA, the following information must be disclosed to the covered borrower before or at the time he or she becomes obligated on the loan or establishes the credit account: 

First, statement of the MAPR;  The League’s MLA loan agreements and TIL disclosures include this model version of the statement (which does not include a numerical value for the MAPR on the borrower’s loan): 

Federal law provides important protections to members of the Armed Forces and their dependents relating to extensions of consumer credit. In general, the cost of consumer credit to a member of the Armed Forces and his or her dependent may not exceed an annual percentage rate of 36 percent. This rate must include, as applicable to the credit transaction or account: The costs associated with credit insurance premiums; fees for ancillary products sold in connection with the credit transaction; any application fee charged (other than certain application fees for specified credit transactions or accounts); and any participation fee charged (other than certain participation fees for a credit card account). 

Second, any disclosure required by Reg. Z, provided in accordance with the Reg. Z requirements that apply to that disclosure; and 

Third: a clear description of the payment obligation of the covered borrower, as applicable. A payment schedule (in the case of closed-end credit) or account opening disclosure (in the case of open-end credit) provided as required by Reg. Z satisfies this requirement.

The statement of the MAPR (#1 above) and the clear description of the payment obligation (#3 above) must be provided (1) in writing and in a form the borrower can keep, and (2) orally. 

A credit union may satisfy the requirement to orally provide the statement of the MAPR and the clear description of the payment obligation if it provides— 

  • The information to the covered borrower in person; or 
  • A toll-free telephone number in order to deliver the oral disclosures to a covered borrower when the covered borrower contacts the creditor for this purpose. To facilitate this second approach, the League has included a fillable field after the statement of the MAPR in its MLR versions of loan agreements and TIL disclosures. A credit union that wishes to provide a toll-free number for oral disclosures can insert it there. For example, it could map in a statement such as “To receive disclosures orally, call us at [insert toll-free number].” 

Limitations

  • The MLA rules restrict credit unions’ ability to take security interests in deposited funds and set off against those funds if credit goes into default. In our MLA versions of the forms, we’ve removed language about liens on shares. You will have no right to setoff for these loans.
  • Creditors cannot require a covered borrower to waive any right to legal recourse under any state or federal law, including the Servicemembers Civil Relief Act. We have removed waivers of various types of notices in the MLA form. For covered borrowers with these forms, credit unions should consider sending a notice of acceleration when calling the loan balance due after default (and expiration of any right to cure). Other notices may sometimes be required.
  • Creditors cannot impose a prepayment penalty in a loan to a covered borrower. We have made sure that these forms contain no prepayment penalties, even to the extent of taking out minimum finance charges, which are sometimes deemed to be prepayment penalties.
  • For any credit subject to the MLA rules, the credit union must provide special disclosures both in writing and verbally. Verbal disclosures can be given in person, or a toll-free number can be provided for borrowers to access them. If the credit union uses a toll-free number for the disclosures, it must be included on the application or on the written MLA disclosure. The rules include model language credit unions should use – consisting of a single paragraph. We’ve added the rule’s model “Statement of the MAPR” to our MLA forms, along with a blank space in which you may insert a sentence providing a toll-free number for obtaining the required oral disclosures.
  • The creditor cannot demand unreasonable notice from the covered borrower as a condition for legal action. We have made sure that these forms contain no such provision.
  • The creditor cannot require the covered borrower to submit to arbitration or imposes other onerous legal notice provisions in the case of a dispute. The WCUL forms do not include such requirements.

How important is it to be sure that your loan forms for covered borrowers are in compliance? The MLA regulations state: “Contract void. Any credit agreement, promissory note, or other contract with a covered borrower that fails to comply with 10 U.S.C. 987 [the Military Lending Act] as implemented by this part [these rules] or which contains one or more provisions prohibited under 10 U.S.C. 987 as implemented by this part is void from the inception of the contract.” 

It is important for credit unions to take steps to implement the limitations stated above. For example, staff must be instructed to refrain from setting off account balances to recover losses on MLA loans to covered borrowers in default. Even if the consumer has left the military by the time of default, so is no longer a covered borrower, setoff will not be available on the MLA loan because it will not have been disclosed and agreed to in the documents. 

Descriptions of changes 

The specific changes to each form are summarized below. Each boldface title in the list below is a hyperlink to a copy that has most changes highlighted. Yellow highlighting on the linked final proofs shows the locations of new or revised text; pink shows new or revised fields. There may be some additional changes not highlighted, including but not limited to deleted text or fields, change in number of characters in fields, etc. 

MLA Chattel Security Agreement (WCUL #82005-MLA) is for use with Military Lending Act loans secured by Consumer Goods or Fixtures, but not inventory or equipment of a business. We have highlighted the revisions being made to the form (in comparison to the #82005 still in use for non-covered borrowers), such as:

  • Revising the title and the caption to describe the purpose of this form for MLA loans;
  • Shifting text flush left and removing paragraph breaks after section titles;
  • Removing grid lines for descriptions of collateral;
  • Removing the check box and language to indicate description is continued on an attached sheet;
  • Removing the reference to the debtor’s name being that shown on the current driver’s license or state identification card;
  • Revising the requirement to notify the Secured Party of changes to the debtor’s legal name or address;
  • Changing Borrower to Customer in the Wis. Stats. § 422.303 notice;
  • Revising the Authority for Secured Party to Perform for Debtor to remove a waiver of notice, and provide for notices if required by the Wisconsin Consumer Act or other law, since the form is used for both WCA and non-WCA transactions;
  • Revising the Remedies on Default to remove waiver of notice or demand, and provide that notice and/or opportunity to cure will be provided if required by Wis. Stats. § 425.105 or other law; and
  • Revising the Miscellaneous section to remove a waiver of certain notices. 

MLA Consumer Note and Federal Truth-In-Lending Disclosures (WCUL #82014-MLA) is designed for use with fixed-rate Wisconsin Consumer Act loans subject to the Military Lending Act. But it is labeled as not for use with a dwelling or real estate as security. We have highlighted the revisions being made to the form (in comparison to the #82014 still in use for non-covered borrowers), such as:

  • Revising the title and the caption to describe the purpose of this form for MLA loans;
  • Repositioning the spaces at the top for the date, account number, names, and addresses;
  • Removing the Wisconsin Consumer Act minimum finance charge;
  • Revising the Consumer Note section regarding security for the loan to remove the language regarding (1) the grant of a broad lien on all shares and deposits, (2) setoff, and (3) pledges of particular shares.
  • Revising the cross-collateral clause to disclaim rights in a dwelling, real estate, shares, deposits, dividends, and interest;
  • Revising the Federal Truth-In-Lending section to remove disclosures of security in specified shares or deposits and in funds on deposit at the time of default;
  • Revising the Truth-In-Lending reference to cross-collateral rights to exclude a dwelling, real estate, deposits, or shares;
  • Revising the Truth-In-Lending disclosure to say that if a consumer pays off the loan early they will not have to pay a penalty;
  • Replacing the word “A” which was dropped from the property insurance disclosure: YOU MAY OBTAIN PROPERTY INSURANCE FROM ANYONE YOU WANT THAT IS ACCEPTABLE TO THE CREDIT UNION. IF YOU GET THE INSURANCE FROM THE CREDIT UNION, YOU WILL PAY $______ FOR A ______ MONTH TERM;
  • Adding the model Statement of the MAPR (labeled here as Military Lending Act Disclosures), along with a blank space where a line may be inserted providing a toll-free number for obtaining the required oral disclosures; 
  • Inserting the word “Each” in “EACH BORROWER ACKNOWLEDGES RECEIPT OF AN EXACT COPY OF THIS AGREEMENT;” 
  • Revising the clause about calling a loan due after default to subject that action to “such other notices as may be required by law” in addition to any Wisconsin Consumer Act notice and opportunity to cure default; 
  • Removing language that waived demand, presentment, protest, notice of acceleration, notice of dishonor, and other notices except those required by law; 
  • Removing language that waived notice requirements (other than any under the Wisconsin Consumer Act) that may have applied when renewing or extending the note, accepting late or partial payments, release of collateral, etc.; and 
  • Adding hyphens to Truth-In-Lending in three locations on the form. 

MLA Non-Consumer Note (WCUL #82031-MLA) is intended for closed-end loans that are exempt from the Wisconsin Consumer Act but subject to the Military Lending Act. It should not be used for any loan secured by a dwelling or real estate. It requires an appropriate Truth-In-Lending disclosure, such as WCUL #82057-MLA. We have highlighted the revisions being made to the form (in comparison to the standard #82031 still in use for non-covered borrowers), such as: 

  • Changing from a three-copy form to a single-copy. The credit union may print the number of copies needed for borrower and credit union copies. It should be printed two-sided on 8½ x 11 paper;
  • Revising the title and adding a caption to describe the purpose of this form for MLA closed-end loans that are exempt from the Wisconsin Consumer Act, but not secured by a dwelling or real estate;
  • Repositioning the spaces at the top for the date, account number, and names, and adding spaces for the name and signature of a fourth borrower;
  • Repositioning the instruction for checking the appropriate box for the chosen payment schedule;
  • Eliminating the options for restricting or penalizing prepayments on the loan;
  • Adding a section to reference a specific security agreement providing collateral for the loan (but not a dwelling or real estate);
  • Revising the section regarding security for the loan to remove the language regarding the grant of a broad lien on all shares and deposits, and setoff;  
  • Revising the cross-collateral clause to disclaim rights in a dwelling, real estate, shares, deposits, dividends, and interest;
  • Removing language that waived demand, presentment, protest, notice of dishonor, and other notices except those required by law;
  • Adding the model Statement of the MAPR (labeled here as Military Lending Act Disclosures), along with a blank space where a line may be inserted providing a toll-free number for obtaining the required oral disclosures;
  • Revising the language whereby the borrowers each acknowledge receipt a copy of the loan agreement;
  • Removing the borrower and cosigner labels;
  • Removing language that waived notice requirements that may have applied when renewing or extending the note, accepting late or partial payments, release of collateral, settle or compromise the amount owing, etc.;
  • Removing waivers from the list of clauses in the note that are joint and several;
  • Removing language that permitted declaring default if any of the borrower’s accounts at the credit union were garnished;
  • Revising the clause about calling a loan due after default to subject that action to “such other notices as may be required by law;”
  • Removing copy labels for borrower and credit union copies, since it is now a single copy form. A fillable field in the same spot in case the credit union chooses to insert its own copy labels for printing multiple copies.  If the borrower signs more than one copy of the form, all but one should be labelled as copies, and
  • Adding a footer field at the bottom of each page of the form which the credit union may use to insert information. 

MLA Consumer Kwik-Cash Loan Agreement and Federal Truth-in-Lending Disclosures (WCUL #82033-MLA) is for Wisconsin Consumer Act open-end lines of credit subject to the Military Lending Act. But it is labeled as not for use with a dwelling or real estate as security. This MLA version may be used for covered borrowers regardless of whether the credit union offers credit line/disability insurance, or debt cancellation/suspension contracts. We have highlighted the revisions being made to the form (in comparison to the #82033 still in use for non-covered borrowers), such as:

  • Reformatting from a three-copy, two-sided form on a single sheet of 8½ x 14 paper to a single-copy, four-sided form on two-sheets of 8½ x 11 paper, with appropriate changes to cross-reference to information on other pages. A large font size is used to aid legibility. The credit union may print the number of copies needed for borrower and credit union copies;
  • Revising the title and adding a caption to describe the purpose of this form for MLA lines of credits subject to the Wisconsin Consumer Act, but not secured by a dwelling or real estate; 
  • Repositioning the spaces for the date, account number, names, and addresses, and adding spaces for the names and signatures of third and fourth borrowers; 
  • Adding the model Statement of the MAPR (labeled here as Military Lending Act Disclosures), along with a blank space where a line may be inserted providing a toll-free number for obtaining the required oral disclosures; 
  • Changing references to Interest Charges to Finance Charges; 
  • Revising a statement about the possible availability of credit life/disability insurance to include debt cancellation/debt suspension products; 
  • Changing several references to Note to Agreement; 
  • Adding a statement that the loan agreement includes all provisions on pages 2-4; 
  • Adding seals to the borrower signature lines, and adding two additional signature lines; 
  • Revising the Additional Charges and Fees to remove the preset dollar amounts in connection with cash advance fees; and remove the minimum finance charge clause; 
  • Revising the Security Interests section to (1) remove the preprinted options for Motor Vehicle and the goods or property being purchased; (2) provide more fillable fields to list collateral; (3) remove the preprinted clause for a pledge of specified shares or deposits; and (4) remove the grant of a broad lien on all shares and deposits with setoff rights; 
  • Revising the cross-collateral clause to disclaim rights in a dwelling, real estate, shares, deposits, dividends, and interest; 
  • Revising the Conditions for Loan Advances, Prepayment, Termination section to remove a reference to waivers under this Agreement; 
  • Revising the Default section to (1) provide that calling a loan immediately due after default is subject to “such other notices as may be required by law” in addition to any Wisconsin Consumer Act notice and opportunity to cure default, and (2) remove language that waived notice of acceleration, presentment for payment, demand, protest, and dishonor unless expressly required by law; 
  • Adding a new section to allow transaction limitations to be agreed upon, such as a minimum amount for loan requests;  
  • Adding a new section to allow the parties to agree upon additional terms; 
  • Removing copy labels for borrower and credit union copies, since it is now a single copy form. A fillable field in the same spot in case the credit union chooses to insert its own copy labels for printing multiple copies.  If the borrower signs more than one copy of the form, all but one should be labelled as copies; and 
  • Adding a footer field at the bottom of each page of the form which the credit union may use to insert information. 

MLA Federal Truth-In-Lending Disclosures (Personal) (WCUL #82057-MLA) is designed for use with certain closed-end Military Lending Act loans documented on the Consumer Note (#82073) or Non-Consumer Note (#82031). But it is not for use with a dwelling or real estate as security. We have highlighted the revisions being made to the form (in comparison to the #82057 still in use for non-covered borrowers), such as:

  • Revising the title and the caption to describe the purpose of this form for MLA loans; 
  • Repositioning the spaces at the top for the date, account number, and borrower names;
  • Removing the language for disclosure of security interests in the property being purchased, specified shares or deposits, and in funds on deposit at the time of default. The reference to cross-collateral rights was revised to exclude a dwelling, real estate, deposits or shares;
  • Revising the prepayment disclosure to say that if a consumer pays off the loan early they will not have to pay a penalty;
  • Shifting the position of the required deposit disclosure; and
  • Adding the model Statement of the MAPR (labeled here as Military Lending Act Disclosures), along with a blank space where a line may be inserted providing a toll-free number for obtaining the required oral disclosures.

MLA Consumer Note (WCUL #82073-MLA) is intended for closed-end Wisconsin Consumer Act loans subject to the Military Lending Act. We have highlighted the revisions being made to the form (in comparison to the #82073 still in use for non-covered borrowers), such as: 

  • Revising the title and the caption to describe the purpose of this form for MLA loans;
  • Repositioning the spaces at the top for the date, account number, and names;
  • Revising the section regarding security for the loan to remove the language regarding (1) the grant of a broad lien on all shares and deposits, (2) setoff, and (3) pledges of particular shares;
  • Revising the cross-collateral clause to disclaim rights in a dwelling, real estate, shares, deposits, dividends, and interest unless described in the note or in a security agreement or mortgage written in connection with the note;
  • Adding the model Statement of the MAPR (labeled here as Military Lending Act Disclosures), along with a blank space where a line may be inserted providing a toll-free number for obtaining the required oral disclosures;
  • Inserting the word “Each” in “EACH BORROWER ACKNOWLEDGES RECEIPT OF AN EXACT COPY OF THIS AGREEMENT;”
  • Revised the clause about calling a loan due after default to subject that action to “such other notices as may be required by law” in addition to any Wisconsin Consumer Act notice and opportunity to cure default;
  • Removing language that waived demand, presentment, protest, notice of acceleration, notice of dishonor, and other notices except those required by law; and
  • Removing language that waived notice requirements (other than any under the Wisconsin Consumer Act) that may have applied when renewing or extending the note, accepting late or partial payments, release of collateral, etc.

There are other non-substantive changes to the text of the various forms as well, including the form number format, revision date, copyright date, etc. 

Use of WCUL fillable .pdf forms 

Credit unions may use the fillable .pdfs on their desktops or have them mapped to their data processing systems. It is up to the credit union to forward their licensed .pdf files to the data processor, if they choose, for installation and mapping for use on the credit union’s system. Your data processor will not have the forms until you forward them! Credit unions may also share this Compliance Courier with their data processor if doing so will aid in mapping fields. 

Laser forms should be printed and reviewed for proper display. Compare printouts of the installed forms to the final proofs available through the links above. 

Please keep in mind that the licenses for WCUL forms permits use of the same .pdf files for manual completion on a desktop. This may be a valuable option during the time it may take for a data processor to map the fields when putting an updated form on the system. 

Please address form order questions to Jeff Bonk at 800-242-0833, ext. 6044, and questions about completion of the form and compliance to John C. Engel at ext. 6007. 

Important reminders

Please keep in mind that WCUL forms are designed for use in transactions subject to Wisconsin law and applicable federal law. 

Please remember that the forms you use are important legal documents governing your transactions with affected members. Credit unions are responsible for reviewing forms to determine that they are appropriate for the transaction. Users should read and become familiar with the terms of each form they use and how they must be completed for compliance.

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