Volume 5, Issue 19
Register now to support financial literacy programs in Minnesota
Registration is now open for the MN Credit Union Foundation’s 3rd Annual Financial Literacy 5k – kids’ fun run and family walk/run. It will once again take place at beautiful Lake Normandale Bandshell, located at 5901 West 84th Street in Bloomington, MN.
Last year’s event garnered participation from 19 credit unions; sign up your credit union team today! We will once again distribute medals to all kids finishing either the kids’ run or 5k (under the age of 12). There will also be face painting, games, warm up yoga, and much more.
Discounted “early bird” registration is open until June 25. For more information, and to register, see the 5K page. All proceeds from the race are used to help fund financial education grants for the following year.
Follow the Financial Literacy 5K on Facebook for updates.
Comprehensive, flexible compliance & audit service available through MnCUN
In today’s complex regulatory environment, it can be difficult for a credit union to ensure compliance with ever-changing rules and regulations. The Minnesota Credit Union Network’s compliance & audit services offer credit unions the option to contract with a highly-qualified professional to help fulfill their compliance obligations.
The Minnesota Credit Union Network’s Compliance & Audit Consultant, Jennifer Stedt, assists credit unions in meeting ongoing regulatory needs and provides compliance and auditing services on a project-by-project basis. Stedt is a certified compliance officer with 20 years of experience in financial institutions. Her hands-on involvement in a diverse range of positions within the financial realm enables her to fully understand the intricacies of credit union operations. Specifically, she has experience in risk management, internal auditing, training, compliance and operations. She also has the ability to establish, develop, and strengthen programs that facilitate credit union compliance with regulations.
The following list of services is a general outline of functions performed through the MnCUN Compliance & Audit Consultant Program:
- Bank Secrecy Act
- Branch Operations
- Credit/Debit Card Administration
- FACT Act
- Lending Compliance
- SAFE Act
- Supervisory Committee Annual Audit
- Vendor Management
- Website Compliance
Additional services may be available upon request. Contact Jennifer Stedt by email, by phone at (651) 288-5509, or toll free at (800) 477-1034.
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What’s Next on the Horizon……Military Lending Act
You may feel you have a little time to catch your breath after implementing the new TRID Integrated Disclosure rules but don’t take too long; the Military Lending Act went into effect October 1, 2015 with required compliance by October 3, 2016. That leaves you approximately six months to make sure your procedures and systems are in place.
Unlike the John Warner National Defense Authorization Act which didn’t apply to the products offered by many financial institutions, this new rule will most likely apply to you. The Act covers consumer credit subject to regulation Z with the exception of credit secured by a dwelling (1 to 4 family dwellings including mobile homes whether or not attached to land) and vehicle and personal property purchase money transactions secured by the property being purchased. This means that personal lines of credit, credit cards and other consumer loans which are not purchase money loans or real estate secured loans would be covered by the Act.
The requirements of the Act only apply to covered borrowers, which are consumers who at the time they become obligated under a credit transaction or establish an account are members of the armed forces and are on active duty. The Act only applies while they are on active duty. Therefore, any account opened while the consumer is not on active duty is not covered and any account that was covered will no longer be covered once the consumer is no longer on active duty. Creditors are allowed to apply their own methods for determining if a borrower is on active duty; however, a safe harbor exist if the creditor does one of the following:
The creditor can check PRIOR to the borrower entering into a transaction or establishing an account, the borrower’s status by checking the Department of Defense, http://www.dmdc.osd.mil/mla/welcome.xhtml website and searching by last name, date of birth and social security number; OR
The creditor can verify the status by viewing a consumer report from a nationwide consumer reporting agency and looking for a statement, code or similar indicator describing the status.
Documentation must be retained on how the creditor determined the borrower’s status in order to obtain the safe harbor. The records should support that the status was verified within 30 days prior to the time the credit is originated. If a consumer receives an offer of credit and does not reply within 60 days, verification of status must occur again before credit can be extended.
When lending to a covered borrower (a borrower on active duty), creditors must disclose the following in writing with items 1. and 3. also being disclosed orally:
The Military Annual Percentage Rate (MAPR) – a model statement is available and does not require the actual numerical value to be disclosed.
Regulation Z disclosures
A clear description of the payment schedule
The MAPR is calculated using our current APR calculations in Regulation Z; however, additional items are considered prepaid finance charges such as: credit insurance premiums, premiums for debt cancellation or debt suspension agreements, fees for any credit related ancillary products, and except for credit card fees considered reasonable and bona fide, prepaid finance charges, participation fees, and application fees unless for short term low dollar credit. Fees may be excluded from the MAPR calculation for credit card accounts if the fee is reasonable and bona fide. Definitions and a safe harbor are included to determine what is considered reasonable and bona fide.
There are also limitations to the terms of consumer credit granted to covered borrowers including:
The military APR must be agreed to by contract and cannot exceed 36%
No fees can be charged on open end credit if there is no balance outstanding during the billing cycle except a participation fee that does not exceed $100 (Note: this restriction does not apply to participation fees charged on credit card accounts as long as the fee is reasonable and bona fide)
So while you may be looking forward to a much deserved break after TRID implementation has been completed, it may not be a bad idea to start working on the procedures you will need to have in place to implement the Military Lending Act. October 2016 will be here before we know it.
Wipfli LLP is a 2016 Vendor Involvement Program (VIP) Participant. VIP participants agree to offer professional service, quality products and competitive pricing to Minnesota credit unions. Participation in the Vendor Involvement Program does not constitute an endorsement by the Minnesota Credit Union Network.
With questions about MnCUN's products and services, please contact MnCUN Vice President – Network Service Corporation, John Ferstl by email or at 651-288-5505 or MnCUN Director of Business Development, Kris Jacobsen by email or at 651-288-5515.