Forms Update: WCUL forms aid MLA compliance

The League is releasing updated versions of various WCUL forms to help credit unions comply with the newly effective regulations implementing the Military Lending Act (“MLA”). 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 non-MLA WCUL loan form.

MLA compliance is required for loans to military service members and their dependents closed on or after October 3, 2016. See ii Release No. B067 – Lending to Servicemembers for details. 

The League had previously released MLA versions of six WCUL forms. Those are still compliant, but five of the six are now being replaced with improved forms, based on recent Department of Defense guidance. The major improvements over the 6/16 WCUL versions of these forms include the addition of a Notice of Credit Union’s Statutory Lien and language giving a limited ability to take a specific pledge of shares. 

An additional MLA loan form is offered for use for some land loans to covered borrowers. Also, our standard account forms for all members are revised to include an exception, to the extent required by MLA, to the setoff language.   

Contents

• Forms updated
• Military Lending Act overview
• Disclosures 
• Limitations
• Descriptions of changes to specific forms 
  • Lending Forms
  • Account Forms
• What about HELOC and business loan forms?
• Use of WCUL fillable .pdf forms
• Important reminders 

Forms updated  

The following forms are being emailed within the next few business days at no charge to credit unions that have a current (2016) subscription to the standard version of the affected WCUL loan form. In most cases, the forms will be sent to the credit union president. Each form listed directly below is linked to a proof copy of the form. Detailed descriptions of each form are provided later in this Compliance Courier, with a links to color copies highlighting the major revisions. 

The six MLA versions of WCUL loan forms supplied in July with a 6/16 revision date are technically still usable. But the replacement forms include a Notice of Credit Union’s Statutory Lien and language permitting the pledge of specific shares deposited after consummation of the loan into account(s) opened in connection with the loan. These are not provided in the 6/16 forms. 

The MLA loan forms should only be used for covered borrowers (those on active duty and their dependents). Consumers who are not covered borrowers would have their loans documented on the current standard forms (i.e., 82005, 82014, 82031, 82033, 82042, 82057, and 82073). 

Since the Department of Defense (“DoD”) has not specifically addressed treatment of vacant land loans under the MLA rules, we are only left with a rule that says that it exempts any residential mortgage – any credit transaction secured by an interest in a dwelling. No DoD guidance  goes beyond this to state that MLA  exempts land loans or other non-residential real estate loans. As a result, we are now releasing an MLA version of the Mortgage Note (Non-Consumer) (#82042-MLA, Rev. 10/16) for non-residential mortgages loans when exempt from the Wisconsin Consumer Act. The MLA forms referred to in the first bullet point above already include an MLA version of the Consumer Note used for real estate and other loans subject to the Wisconsin Consumer Act, including certain land loans.  

Again, these MLA loan forms should  only  be used for covered borrowers (those on active duty and their dependents).  

Several WCUL account forms are being revised to state that the lien on shares language does not apply to the extent prohibited by the Military Lending Act, its implementing regulations, or other law. 

These revised account forms are not just for covered borrowers. They are the new standard versions of these WCUL forms, for use on all new account suffixes. If an existing member becomes a covered borrower under MLA, they should sign the new account agreement forms for each old account suffix they have, as well as any new suffix. 

MLA Mortgage Note (Non-Consumer) (#82042-MLA, Rev. 10/16) is a new addition to the list because it may be needed for some loans and other non-residential real estate loans.

• Updated: MLA Consumer Note and Federal Truth-In-Lending Disclosures (#82014-MLA, Rev. 9/16)
• No update: MLA Chattel Security Agreement (#82005-MLA, Rev. 6/16)
• Updated: MLA Consumer Kwik-Cash Loan Agreement and Federal Truth-in-Lending Disclosures (#82033-MLA, Rev. 9/16)
• Updated: MLA Federal Truth-In-Lending Disclosures (Personal) (#82057-MLA, Rev. 8/16)
• Updated: MLA Consumer Note (#82073-MLA, Rev. 9/16)
• Updated: MLA Non-Consumer Note (#82031-MLA, Rev. 9/16)
• New: MLA Mortgage Note (Non-Consumer) (#82042-MLA, Rev. 10/16)
• New: Account Ownership Agreement (#82024, Rev. 9/16)
• New: Share Certificate (#82012, Rev. 9/16)
• New: Organization Account Ownership Agreement (#81057, Rev. 9/16)

More details are provided below in Descriptions of changes to specific forms. 

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.  

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. The remainder of this Compliance Courier will focus on the disclosures and 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, the 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 MLA 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].”

What information should the credit union provide in oral disclosures of the payment schedule? The Department of Defense states that a creditor may orally provide the information in a payment schedule or an account-opening disclosure to a covered borrower. However, an oral recitation of the payment schedule or the account-opening disclosure is not the only way a creditor may comply with § 232.6(a)(3). A creditor may also orally provide a clear description of the payment obligation of the covered borrower by providing a general description of how the payment obligation is calculated or a description of what the borrower’s payment obligation would be based on an estimate of the amount the borrower may borrow. For example, a creditor could generally describe how minimum payments are calculated on open-end credit plans issued by the creditor and then refer the covered borrower to the written materials the borrower will receive in connection with opening the plan. Alternatively, a creditor could choose to generally describe borrowers’ obligations to make a monthly, bi-monthly, or weekly payment as the case may be under the borrowers’ agreements. 

The DoD also says that  nothing in the MLA or the MLA regulation requires that the clear description of the payment obligation provided in writing must be the same as the oral disclosure, provided that both disclosures are clear and accurate.  The DoD concludes that under the this  approach, a generic oral description of the payment obligation may be provided, even though the disclosure is the same for borrowers with a variety of consumer credit transactions or accounts.   

Limitations   

The MLA regulations prohibit certain types of contract provisions in loans to covered borrowers. The League has designed its MLA forms to avoid the prohibited terms. 

• 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 or consents may be required at times such as consent of cosigners or guarantors to loan deferrals, modifications, etc.
• 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.
• The MLA rules restrict credit unions’ ability to take security interests in deposited funds of covered borrowers. In our MLA versions of the loan forms, we’ve rewritten the language for a specific pledge of shares. The lien may only apply to funds deposited after the loan closes into a specified share or deposit account established in connection with the loan.
• The MLA rules seem to restrict the ability to include language for the typical right of set off against deposited funds if the loan goes into default. In our MLA versions of the forms, we’ve removed language about liens on shares. You will not have the customary right to setoff for loans using the WCUL MLA forms. At this point, it is not clear that such liens are workable under the latest MLA guidance.

  The 9/16 updated MLA forms do include a new Notice of Credit Union’s Statutory Lien. This gives a right to apply a member’s shares against a delinquent loan balance, after default, expiration of any right to cure, and notice of acceleration. 

A statutory lien works very much like setoff, but stay tuned for any further guidance on how these liens work. For example, the statutory liens for both state and federal credit unions are only described as applying to the member’s funds. Thus, the credit union’s rights to funds may be more limited than under the setoff language in standard (non-MLA) forms.

Wisconsin’s state-chartered credit unions have a statutory lien under Wis. Stats. §186.098(13):   

(a) Subject to any limitation on security interests identified in s. 422.417 (3) and if the loan agreement or endorsement permits it, a credit union shall have a lien on the share deposits and deposit accounts and accumulated dividends of a member for any amount owed the credit union by the member and for any loan endorsed by the member. Upon the default of the owner of the account in an obligation owed to the credit union, the credit union shall have a right of immediate setoff for each share deposit and deposit account unless prohibited under 12 CFR 226.12(d). If the loan is a consumer credit transaction as defined in s. 421.301 (10), ss. 425.104 and 425.105 apply to a default under this paragraph. The credit union may also refuse to allow withdrawals from any share deposit or deposit account in an amount not to exceed any delinquent obligation to the credit union.   

(b) The credit union may waive its rights to a lien, to immediate setoff or to restrict withdrawals or to any combination of these rights for any share deposit or deposit account. 

Federal credit unions have a statutory lien under 12 CFR 701.39. Please see the regulation for details. 

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. The credit union might still have some rights to recover from funds on deposit under the Notice of Credit Union’s Statutory Lien on Shares that is now included in the MLA loan documents.   

Descriptions of changes to specific forms  

The links included below provide proofs of the forms, with highlighting to draw attention to most revised text or fields, as compared to the standard versions of the forms. 

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.

Lending forms

MLA Consumer Note and Federal Truth-In-Lending Disclosures (WCUL #82014-MLA, Rev 9/16 )  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;
• Adding hyphens to Truth-In-Lending in three locations on the form;
• Shifting the Truth-In-Lending disclosures to the beginning of the form, shifting the location of its blank line for a description of security, and removing the reference to refunds and penalties;
• Inserting the word “A” in 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 describing availability of a toll-free number for obtaining the required oral disclosures; 
• Removing the Wisconsin Consumer Act minimum finance charge, since it is a type of prepayment penalty;
• Shifting the location of the returned check charge to a separate paragraph;
• Adding a Notice of Credit Union’s Statutory Lien on a member’s shares and deposits, except when prohibited by law;
• Inserting the word “Each” in the acknowledgement of copies: “EACH BORROWER ACKNOWLEDGES RECEIPT OF AN EXACT COPY OF THIS AGREEMENT”; 
• Adding a statement that all terms of identified security agreements are incorporated into the note;
• Revising the pledge of specific shares clause to limit it to funds deposited after the loan closes in a named account opened in connection with the loan;
• Adding an exclusion from the cross-collateral clause for collateral prohibited by regulations implementing the Military Lending Act or any other state or federal law (It already specifically excludes household goods, per Wis. Stats. §422.417.);
• Removing the language granting a broad security interest and lien on all shares and deposits (setoff) to be applied to the loan balance in the event of default;
• 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 
• Shifting the Additional Provisions section to the end of the form, and expanding it with two additional blank lines.

Important reminders: 

• Don’t fill in blank security sections with prohibited liens.
• Waiver of notice of acceleration is removed, so after a default, send written notification to the borrower(s) if you are calling the whole balance due and payable. This must be done after the notice of right to cure expires but before any setoff, repossession, or court action. Without this step, the member’s future payments are not yet due.
• If you have a co-borrower, cosigner, or guarantor, do not defer payments, release a party to the loan, excuse late payments, etc., without their written notification (or even written consent).

MLA Chattel Security Agreement (#82005-MLA, Rev. 6/16) is for use with Military Lending Act loans secured by Consumer Goods or Fixtures, but not inventory or equipment of a business. Subscribers received the 6/16 MLA version of the form and there is no further update. We have highlighted the revisions 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 Kwik-Cash Loan Agreement and Federal Truth-in-Lending Disclosures (WCUL #82033-MLA, Rev. 9/16) 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 larger 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 credit 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 (A separate DC version of this MLA form is not needed for credit unions offering debt suspension/cancellation products.) (Credit unions are cautioned about the risk that such products may cause the MAPR to exceed 36%); 
• 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; 
• Providing two rather than one blank space for identifying collateral;
• Revising the pledge of specific shares clause to limit it to funds deposited after the loan closes in a named account opened in connection with the loan;
• Adding an exclusion from the cross-collateral clause for collateral prohibited by regulations implementing the Military Lending Act or any other state or federal law (It already specifically excludes household goods, per Wis. Stats. §422.417.);
• Removing the language granting a broad security interest and lien on all shares and deposits (setoff) to be applied to the loan balance in the event of default;
• Adding language whereby the Borrower agrees that the collateral is not and will not be used as a dwelling;
• Adding a Notice of Credit Union’s Statutory Lien on a member’s shares and deposits, except when prohibited by law;
• 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 labeled 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. 

Important reminders: 

• Don’t fill in blank security sections with prohibited liens.
• Waiver of notice of acceleration is removed, so after a default, send written notification to the borrower(s) if you are calling the whole balance due and payable. This must be done after the notice of right to cure expires but before any setoff, repossession, or court action. Without this step, the member’s future payments are not yet due.
• If you have a co-borrower, cosigner, or guarantor, do not defer payments, release a party to the loan, excuse late payments, etc., without their written notification (or even written consent).

MLA Federal Truth-In-Lending Disclosures (Personal) (WCUL #82057-MLA, Rev. 8/16) 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;
• Shifting the blank fillable space in the Security disclosure up higher;
• Revising the disclosure regarding security interests in collateral securing other loans, to remove the exceptions for a dwelling, real estate. (The form cannot be used for loans secured by a dwelling or real estate);
• Revising the prepayment disclosure to say that if a consumer pays off the loan early they will not have to pay a penalty (because the companion MLA notes no longer have a minimum finance change);
• Remove the disclosure that the consumer may be entitled to rebate upon prepayment (because the companion MLA notes no longer have a minimum finance change);
• 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, Rev. 9/16) is intended for closed-end Wisconsin Consumer Act loans subject to the Military Lending Act, including those secured by non-residential real estate. We have highlighted the revisions being made to the form (in comparison to the standard #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;
• Repositioning of most collateral-related clauses to the top of the second page;
• Adding a Notice of Credit Union’s Statutory Lien, on a member’s shares and deposits, except when prohibited 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;
• Inserting the word “Each” in “EACH BORROWER ACKNOWLEDGES RECEIPT OF AN EXACT COPY OF THIS AGREEMENT;”
• Adding space “and___________________” to allow identification of an additional security agreement or mortgage, after the first one named;
• Revising the pledge of specific shares clause to limit it to funds deposited after the loan closes in a named account opened in connection with the loan;
• Adding an exclusion from the cross-collateral clause for collateral prohibited by regulations implementing the Military Lending Act or any other state or federal law (It already specifically excludes household goods, per Wis. Stats. §422.417.);
• Adding mortgages to the cross-collateral clause, as well as an exclusion from the cross-collateral clause for real estate unless described in a mortgage written in conjunction with the note (there is already similar language for dwellings);
• Removing the language granting a broad security interest and lien on all shares and deposits (setoff) to be applied to the loan balance in the event of default;
• 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;
• 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
• Shifting the Additional Provisions section to the end of the form, and expanding it with three additional blank lines.

Important reminders: 

• Don’t fill in blank security sections with prohibited liens.
• Please fill in the appropriate separate TIL disclosure form (e.g., WCUL #82057-MLA, or TRID for land loans) accurately reflecting what this Note says, to avoid TIL violations. Doing so requires diligence on the part of the credit union.
• Waiver of notice of acceleration is removed, so after a default, send written notification to the borrower(s) if you are calling the whole balance due and payable. This must be done after the notice of right to cure expires but before any setoff, repossession, or court action. Without this step, the member’s future payments are not yet due.
• If you have a co-borrower, cosigner, or guarantor, do not defer payments, release a party to the loan, excuse late payments, etc., without their written notification (or even written consent).

MLA Non-Consumer Note (WCUL #82031-MLA, Rev. 9/16) is intended for closed-end loans that are exempt from the Wisconsin Consumer Act but subject to the Military Lending Act. Remember that loans solely for the purchase of a motor vehicle or personal property are exempt from MLA, so use the standard forms for those. Non-purchase vehicle or personal property loans over $25,000 would be typical uses of this MLA form, as well as signature loans over $25,000. As with the standard version, this form should not be used for any loan secured by a dwelling or real estate. This form typically requires an appropriate Truth-In-Lending disclosure, such as WCUL #82057-MLA. We have highlighted most 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;
• Removing the space for the interest rate in words, leaving only the interest rate in numerals;
• Repositioning the instruction for checking the appropriate box for the chosen payment schedule;
• Eliminating the options for restricting or penalizing prepayments on the loan;
• Removing language that waived demand, presentment, protest, notice of dishonor, and other notices except those required by law;
• 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;
• Adding a Notice of Credit Union’s Statutory Lien on a member’s shares and deposits, except when prohibited 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 of a copy of the loan agreement;
• Removing the borrower and cosigner labels, and adding seals to the signature lines;
• Adding a section to reference specific security agreements providing collateral for the loan (Do not use for a dwelling or real estate);
• Adding a statement that all terms of identified security agreements are incorporated into the note;
• Adding language for a pledge of specific shares to secure the loan, but limiting it to funds deposited after the loan closes in a named account opened in connection with the loan;
• Limiting the cross-collateral clause when the collateral is prohibited by Wis. Stats. s. 428.103 or 16 CFR Part 444 relating to non-purchase liens on household goods, regulations implementing the MLA (e.g., liens on accounts), or other state or federal law;
• Removing the language granting a broad security interest and lien on all shares and deposits (setoff) to be applied to the loan balance in the event of default;
• 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 labeled as copies;
• Shifting the Additional Provisions section to the end of the form, and expanding it with two additional blank lines, and
• Adding a footer field at the bottom of each page of the form which the credit union may use to insert information. 

Important reminders: 

• Don’t fill in blank security sections with prohibited liens.
• Please fill in the appropriate separate TIL disclosure form (e.g., WCUL #82057-MLA) accurately reflecting what this Note says, to avoid TIL violations. Doing so requires diligence on the part of the credit union.
• Waiver of notice of acceleration is removed, so after a default, send written notification to the borrower(s) if you are calling the whole balance due and payable. This must be done before any setoff, repossession, or court action. Without this step, the member’s future payments are not yet due.
• If you have a co-borrower, cosigner, or guarantor, do not defer payments, release a party to the loan, excuse late payments, etc., without their written notification (or even written consent).

MLA Mortgage Note (Non-Consumer) (WCUL #82042-MLA, Rev. 10/16). The standard form is used for closed-end RE or dwelling-secured loans not subject to the Wisconsin Consumer Act. This MLA form is used for covered borrowers for such loans when not exempt. Remember that dwelling-secured loans are exempt from MLA, so use the standard form for those – even for covered borrowers. Lot loans and non-residential real estate loans appear to be subject to MLA so this form may be used for those, when not subject to the Wisconsin Consumer Act. We have highlighted the revisions being made to the form (in comparison to the standard #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;
• Removing the space for the interest rate in words, leaving only the interest rate in numerals;
• Replacing “other (specify)” with “in” for the fill-in-the-blank payment option;
• Shifting the locations of various clauses;
• Inserting a clause relating to credit life/disability or debt suspension/cancellation products. Such products cannot be allowed to cause the MAPR to exceed 36%;
• Removing the language granting a broad security interest and lien on all shares and deposits (setoff) to be applied to the loan balance in the event of default;
• Adding a Notice of Credit Union’s Statutory Lien on a member’s shares and deposits, except when prohibited 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, such as “To receive disclosures orally, call us at [insert toll-free number]“; 
• Slightly revising the text referencing the security agreement(s) or mortgage(s) securing the loan;
• Adding a clause for a pledge of specific shares but only for funds deposited after the extension of credit in an account established in connection with the consumer credit transaction;
• Revising the cross-collateral clause so that it only applies to the extent not prohibited by regulations implementing the MLA (e.g., liens on accounts), or other state or federal law (such as household goods under Wis. Stats. s. 428.103.) As on the standard form, the clause also excludes cross-collateral to real estate or dwellings securing other loans unless they are specifically referenced at the top of page 2;
• Revised the clause about calling a loan due, after default, to require “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 that may have applied when renewing or extending the note, accepting late or partial payments, release of collateral, etc.; and
• Shifting the Additional Provisions section to the end of the form, and expanding it with three additional blank lines.

Important reminders: 

• Don’t fill in blank security sections with prohibited liens.
• Please fill in the appropriate separate TIL disclosure form (e.g., WCUL #82057-MLA, or TRID for land loans), accurately reflecting what this Note says, to avoid TIL violations. Doing so requires diligence on the part of the credit union.
• Waiver of notice of acceleration is removed, so after a default, send written notification to the borrower(s) if you are calling the whole balance due and payable. This must be done before any setoff, repossession, or court action. Without this step, the member’s future payments are not yet due.
• If you have a co-borrower, cosigner, or guarantor, do not defer payments, release a party to the loan, excuse late payments, etc., without their written notification (or even written consent).

Account forms

Several standard WCUL account forms are revised to accommodate MLA limitations. 

The two standard account ownership agreements forms and the share certificate form are revised, Use these forms immediately for MLA covered borrowers, replacing their existing account ownership forms. For other account owners, not (yet) affected by MLA, you can have them mapped before implementation. 

These changes are intended to prevent the regular references in the account agreement from being deemed to violate the MLA limitations. 

Account Ownership Agreement (WCUL #82024, Rev. 9/16) is intended for use with all single or joint ownership accounts of individual persons, not just those owned by covered borrowers under MLA. This form is revised by: 

• Stating that the security interest or lien granted does not apply to the extent prohibited by the Military Lending Act or its implementing regulations, or other law; and
• Adding Money Market Share Account as an account type, but remove Share Certificate as an option (because the League’s Share Certificate is designed to serve as its own account agreement); and
• Underlining “only” to stress that POD Beneficiaries should be named only if the POD Beneficiary option box is checked off on the form.

Share Certificate (WCUL #82012, Rev. 9/16) is intended for use with all member share certificate accounts, not just those owned by covered borrowers under MLA. See ii Release No. 0015 for more information on share certificate accounts using the WCUL form. This form is revised by:

• Slightly rewording Section 2 Notice to save a line of space on the form;
• Stating that the security interest or lien granted does not apply when prohibited by the Military Lending Act or its implementing regulations, or other law;
• Stating that the transfer of such funds to any obligation owed to the credit union is subject only to such notice as may be required by law; and
• Underlining “only” to stress that POD Beneficiaries should be named only if the POD Beneficiary option box is checked off on the form.

Organization Account Ownership Agreement (WCUL #81057, Rev. 9/16) is intended for use with all organization accounts, not just those owned by covered borrowers under MLA. See ii Release No. 0161 for more information on organization accounts. This form is revised by: 

• Stating that the security interest or lien granted does not apply to the extent prohibited by the Military Lending Act or its implementing regulations, or other law; and
• Adding Money Market Share Account as an account type, but remove Share Certificate as an option (because the League’s Share Certificate is designed to serve as its own account agreement).
• Underlining “only” to stress that POD Beneficiaries should be named only if the POD Beneficiary option box is checked off on the form.

What about HELOC and business loan forms?   

HELOC land loans? MLA versions of the League’s REAP HELOC forms will not be offered for use on HELOCs secured by vacant land or non-residential structures. That is because the League’s standard REAP forms are not designed for such use either. The Reg. Z HELOC rules that the forms are designed to deal with do not apply to property without a residence. Such loans are not likely to be used for a home mortgage interest deduction. The League does not have line of credit forms suitable for non-residential land as security. 

MLA business loans? MLA does not exempt all business loans. It only exempts business loans if they are exempt from Reg. Z. 

The League’s business loan forms should not be used for those few business loans that may be subject to Regulation Z. The League’s business loan forms are not designed for Reg. Z compliance, and would not comply with MLA for a covered borrower. See ii Release No. B001 and its Exhibit C – Flow Chart for Determining Regulation Z Coverage for guidance.   

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 with 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.