CM Updates Loanliner for MLA Posted by AVCU on 12:00 PM

CUNA Mutual Group has updated its LOANLINER updated its Military Lending Act (MLA) compliant lending documents as a result of the recent guidance provided from the Department of Defense (DOD).  The main revisions that LOANLINER added to its MLA compliant lending documents are the ability for credit unions to originate a share secured loan for a covered borrower and the notice of the right to impress a statutory lien.

The Guidance did not alter LOANLINER’s decision to offer separate MLA lending documents for credit unions to use for covered borrowers.

MLA Document Revisions Generally:

• Include language to allow credit unions to originate a share secured loan
• LOANLINER is not opining on whether in order to take a security interest in funds, the covered borrower’s funds must be deposited after the extension of credit is made and in an account established as part of the loan transaction. 
• Include the notice of the right to impress a statutory lien
• Include additional language in the cross collateral provision so that the security interest may not be used in a way that is prohibited by federal and/or state laws.

Credit unions will start receiving updated standard documents prior to the October 3rd effective date.
Given the amount of time and effort required to update the documents in a short period of time, customized documents may not be received until after October 3rd.

Can a federal credit union impress a statutory lien if it does not receive its amended MLA compliant documents on or before October 3?

Yes. Pursuant to NCUA Rules and Regulations §701.39, federal credit unions may impress a statutory lien in one of three ways:

• Providing notice in the member’s account agreement(s) or other account opening documentation;
• Providing notice in a loan document signed or otherwise acknowledged by the member(s); or
• Adopting an appropriate credit union by-law or board policy and providing notice of such to the member.

This applies only to federal credit unions. State chartered credit unions should look to their respective state law to see if they have any similar authority.

How may a Federal credit union enforce a statutory lien against a covered borrower’s accounts?

Pursuant to NCUA Rules and Regulations §701.39, a default is required by a covered borrower. This happens when the member fails to satisfy an outstanding financial obligation due and payable to the credit union.

Even if the member is in default, often times members in default will not have any funds in their share account to recover. Thus, the likelihood that a covered borrower will be in default and have any money in the share account that the credit union may recover, is low.  Members of the military can lose their security clearances for accumulating large amounts of personal debt or falling behind on payments.

So, even if a credit union doesn’t receive their amended MLA customized documents by the Oct 3rd date, they can use the documents that have already been issued, they just can’t exercise the statutory lien or a pledge of shares without giving the member additional notice as required by federal or state law.

Differences between the Standard Lending Document and the Revised MLA Covered Borrower Document: