The Department of Defense released new guidance on the Military Lending Act in late August, which could have implications for the powersports finance industry, said David Gemperle, partner at law firm Nisen & Elliott LLC.
The MLA limits the military annual percentage rate (MAPR) that a creditor may charge to a maximum of 36%. The new guidance, however, excludes secured vehicle or personal property finance transactions. The MLA “is a new thing that can impact everyone in auto finance and the powersports industry, with regards to what is considered a loan for personal property,” Gemperle said.
Scrutiny has already arisen from the Consumer Financial Protection Bureau as well, said Mary Calkins, partner at Akerman LLP. Calkins was referring to a May 2015 Department of Justice settlement with Evergreen Bank Group Inc. to resolve allegations of discriminatory lending practices relating to indirect motorcycle lending. The consent order required the bank to pay $395,000 in consumer redress and to implement dealer compensation policies.
“As the CFPB continues to expand its jurisdiction and enforcement actions, UDAAPs and fair lending considerations are increasingly important for powersports finance lenders,” she said. “Understanding how issues turn into enforcement actions and implementing current best practices can help keep lenders out of CFPB’s cross hairs.”
Calkins and Gemperle will discuss further industry oversight and offer proactive lessons during the Regulatory Compliance Update session at the upcoming PowerSports Finance 2016, Oct. 5 at Bellagio Las Vegas. For information or to register, click here.