NAFCU and the Defense Credit Union Council (DCUC) told the Department of Defense (DoD) in a letter Wednesday of the compliance challenges associated with its explanation of guaranteed acceptance protection (GAP) insurance housed within the Military Lending Act (MLA) rule.
This insurance is addressed in question-and-answer No. 2 from the DoD’s 2016 interpretive rule amendments released last month. The groups asked that the question be rescinded from its interpretive rule and the subsequent amendments due to the confusion it has created for credit unions and their third-party vendors.
GAP insurance protects against situations when a purchased vehicle is destroyed or stolen and the value of that vehicle is less than the remaining loan balance. NAFCU and the DCUC said question No. 2 seems to prohibit access to GAP insurance for the MLA-covered borrower when they want to finance the insurance with the loan used to purchase the vehicle.
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