The DoD s 11th Hour Interpretive Rule For New MLA Rules September 20, 2016 Moderator Alan S. Kaplinsky Practice Leader Consumer Financial Services 215.864.8544 kaplinsky@ballardspahr.com Panelists John L. Culhane, Jr. Partner Consumer Financial Services 215.864.8535 culhane@ballardspahr.com Anthony C. Kaye Partner Consumer Financial Services 801.531.3069 kaye@ballardspahr.com Juliana D. Gerrick Associate Consumer Financial Services 215.864.8549 gerrickj@ballardspahr.com Copyright 2016 Ballard Spahr LLP. All rights reserved.
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Your Presenters Alan S. Kaplinsky John L. Culhane, Jr. Anthony C. Kaye Juliana D. Gerrick 4
Def. of Consumer Credit (Questions 1-2) Overdraft products - Follows treatment of overdraft coverage under Regulation Z - Overdrafts not made pursuant to a written agreement are outside of the MLA Purchase money financing exclusion for personal property - Somewhat ambiguous answer as to application of exclusion Hybrid purchase money and cash advance loan not excluded Financing unrelated to the purchase not excluded Additional cash-out financing not excluded Loan must finance only the acquisition to be excluded - Similar exclusions for personal property and motor vehicles What about negative equity and financing of add-on products? 5
MAPR General (Questions 3-5) MAPR in excess of 36% in a billing cycle for open-end credit - To comply, fees or finance charges may be waived in whole or in part Fees imposed on creditor by law and passed through to borrower - Are not finance charges under Regulation Z and therefore may be excluded from the calculation of MAPR No balance billing cycle for open-end credit - Fees or charges not included in the calculation of MAPR may be assessed in periods where the balance is zero 6
MAPR Credit Cards (Questions 6-8) Minimum interest charge - May be a bona fide fee excludable from the MAPR Sources of information for bona fide fee calculations - Not restricted to SEC filings or Call Reports - May rely on commercially available databases or other industry sources Participation fee - Impact of rewards program may be considered in determining overall reasonableness - Rewards program benefits may also be considered in determining whether fee amount is less than or equal to average amount for substantially similar product or service 7
Safe Harbor (Questions 9-11) Assignees may have the benefit of the safe harbor - Assignee must maintain the safe harbor records of the creditor Periodic screening of credit portfolios for risk management or other purposes is permitted - However, safe harbor may not be established by lookback MLA database internet address is not fixed - Don t confuse the MLA database with the SCRA database 8
Disclosure Issues (Questions 12-14) Options for oral disclosure of payment obligation - Provide exact information from payment schedule - Provide information based on estimate of amount borrowed - Provide generic description of payment schedule Availability of information provided through toll-free phone number - Only has to be available for a duration of time reasonably necessary to allow a covered borrower to contact the creditor Providing MLA disclosures after borrower becomes obligated - MLA timing requirements do not override provisions in Regulation Z - MLA disclosures need not be separately provided in such situations (purchase orders or requests for credit made by mail, telephone, or fax) 9
Savings Clause (Question 15) Single agreement for both covered and non-covered borrowers - Permissible so long as any prohibited terms are limited in application to only noncovered borrowers by use of a savings clause 10
Bank Account Access (Questions 16-18) Covered borrower is not prohibited from repaying by check or EFT - Recurring payments complying with Regulation E are permissible - But no security interests in remotely created checks or money orders - And no post-dated checks Covered borrower may grant a security interest in his or her account - Security interest is not limited to funds deposited after credit is extended (?) - But creditor may not charge MAPR in excess of 36% Creditor may exercise a statutory interest in deposited funds - Statutory lien applies regardless of time of deposit - But creditor may not charge MAPR in excess of 36% 11
Vehicle Security Interest (Question 19) Definition of vehicle - Does not include motor homes, RVs, golf carts, or motor scooters 12
State Antidiscrimination Laws The following states prohibit discrimination against servicemembers specifically in the context of credit decisions or in general: - Arkansas (credit) - California (credit) - Indiana (credit) - Michigan - Missouri - Minnesota - New York (credit) - North Carolina - Ohio (credit) - Rhode Island (credit) - Washington (credit) 13
Thank you for joining us! Moderator Alan S. Kaplinsky Practice Leader Consumer Financial Services 215.864.8544 kaplinsky@ballardspahr.com Panelists John L. Culhane, Jr. Partner Consumer Financial Services 215.864.8535 culhane@ballardspahr.com Anthony C. Kaye Partner Consumer Financial Services 801.531.3069 kaye@ballardspahr.com Juliana D. Gerrick Associate Consumer Financial Services 215.864.8549 gerrickj@ballardspahr.com 14
Moderator Alan S. Kaplinsky Practice Leader of the Consumer Financial Services Group at Ballard Spahr Devotes his practice to counseling financial institutions with respect to bank regulatory and transactional matters and defending them in individual and class action lawsuits (including CFPB investigations and government enforcement matters) First President of the American College of Consumer Financial Services Lawyers and the recipient of the College s 2016 Lifetime Achievement Award Former Chair of the American Bar Association Committee on Consumer Financial Services of the Business Law Section Co-Chair of the Practising Law Institute's Annual Consumer Financial Services Institute, now on its 21 st year Has been named as a tier one banking and consumer financial services lawyer in the 2006 through 2016 editions of Chambers USA Has been named in The Best Lawyers in America under financial services regulation law and banking and finance litigation from 2007 to 2015 Member of the Bloomberg BNA Banking Report Advisory Board Recipient of the National Law Journal's 2015 Litigation Trailblazers Award for pioneering the use of class action waivers in consumer arbitration provisions 15
Panelist John L. Culhane, Jr. Partner at Ballard Spahr and a member of the firm s Consumer Financial Services, Mortgage Banking, Bank Regulation and Supervision, Higher Education, and Privacy and Data Security Groups as well as its Marketplace Lending Task Force, Fair Lending Task Force, TCPA Task Force, and Military Lending Act Task Force Compliance practice emphasizes counseling clients on the development and implementation of innovative loan, leasing, and payment programs, and includes counseling on fair lending, servicing and collection issues Regulatory practice includes preparing clients for banking agency and CFPB targeted fair lending and full spectrum compliance examinations as well as assisting in the defense of consumer class actions, attorney general investigations, and agency enforcement actions Named a top consumer financial services lawyer by Chambers USA, 2015 & 2016 Charter member of the American College of Consumer Financial Services Lawyers Former Chair of the Subcommittee on Fair Lending of the ABA Committee on Consumer Financial Services 16
Panelist Anthony C. Kaye Partner at Ballard Spahr and a member of the firm s Consumer Financial Services and Mortgage Banking Groups Focuses on business litigation and complex civil litigation at both the trial and appellate levels in federal and state courts throughout the United States Counsels financial institutions on regulatory matters, advises them on compliance with consumer financial services laws (including the SCRA and MLA), and defends them in both individual and class action lawsuits Member of the ABA Committee on Consumer Financial Services 17
Panelist Juliana D. Gerrick Associate at Ballard Spahr and a member of the firm s Consumer Financial Services Group Advises institutions on federal and state consumer finance laws, including those governing fair lending, credit reporting, privacy, marketing, payments, debt collection, military lending, and unfair, deceptive, and abusive acts and practices Counsels providers of consumer financial services, including banks, on regulatory compliance matters and preparing for examinations by the Consumer Financial Protection Bureau (CFPB) Prior to joining the firm, Ms. Gerrick was a Management Associate for Citigroup, Inc., where she worked in Citi Cards Compliance, Retail Banking Compliance, AML Advisory Compliance, and Fixed Income Compliance Ms. Gerrick has also clerked for the State of California s Office of the Attorney General, Corporate Fraud and Securities Unit 18