MLA: Credit cards and the bona fide fee exemption

Happy St. Patrick’s Day compliance aficionados! I hope you are wearing green and that you have plans to enjoy a green beer before the day is over. Today, I’d like to continue addressing nuances with the Military Lending Act, focusing on a credit card specific issue.”

Under the MLA, a credit union may not impose an MAPR greater than 36 percent in connection with an extension of consumer credit. For credit card accounts, credit unions are not required to comply with DoD’s July 2015 rule until October 3, 2017. The DoD gave this additional time given the increased level of complexity for implementing the rules for credit cards.

Generally, the MAPR for open-end credit should be calculated following the rules for calculating the effective APR for a billing cycle as set for in 12 CFR 1026.14 (c) and (d) of Regulation Z. For consumer credit extended in a credit card account under an open-end (not home-secured) consumer credit plan, a bona fide fee, other than a periodic rate, is not a charge required to be included in the MAPR calculation, provided the fee is both bona fide and reasonable for the type of fee. Note, there is no exclusion for bona fide fees on accounts that are not credit card accounts.

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