Are we required to check the status of all applicants, regardless of whether or not they indicate to us they are possibly a covered borrower or dependent, to determine if they are a covered borrower or dependent?

We will be checking the status of all borrowers that are applying for loans that are covered by the reg.

You are required to follow MLA for covered borrowers. You get safe harbor if YOU check credit bureau or DOD MLA website. If you are relying on the consumer to inform you, you may be missing covered borrowers.

We are planning on doing a monthly batch check and relying on credit reports.

I see it as a risk decision. If you are positive your applicant isn't military then the MLA doesn't apply. But as noted, if that person for some odd reason wanted to defraud you, there is that possibility.

Batch processing your existing accounts is fine for the SCRA, but is meaningless for MLA as I see it. You batch existing loans, and for the MLA that's too late.

We are a CU, so we have repeat loan customers under the same account number, so the batch checks will work for us. I guess I hadn't really thought that they wouldn't be as applicable for others!
Also, we offer a short term loan product that does not pull credit but uses the account history (length of membership, number and amount of deposits, etc) to make a decision. The batches for this product will be critical as the MAPR will be close to the 36% and will need to be monitored carefully for covered borrowers.
And we will use the batch checks to let us know if a covered borrower is no longer covered and we can remove the monitoring for the open ended accounts.

I'm curious how the batch check will work.

I get a loan today and I'm not covered. You run your batch check on 5/31 and I'm still not covered. On 6/15 I'm inducted into the service branch of my choice. I apply for an additional (covered) loan on 6/20. When do you check my status for the application I gave you on 6/20?

232.5(b)(3) A creditor may make the determination described in this paragraph (b), and keep the record of that information obtained at that time, solely at the time—
(i) A consumer initiates the transaction or 30 days prior to that time

So if we check on 5/31 and they apply on 6/20, we would still have safe harbor coverage.

Still working on all the procedural details, but we pull credit when doing a loan and would most likely look to the credit report for indication of covered borrower status at that time. Plus if they indicate that their occupation is military, we would obviously look to the credit report for covered borrower status.

So if we check on 5/31 and they apply on 6/20, we would still have safe harbor coverage.

I don't read it that way but I'm open to other interpretaions.

3) Determination and recordkeeping; one-time determination permitted. A creditor who makes a determination regarding the status of a consumer by using one or both of the methods set forth in paragraph (b)(2) of this section shall be deemed to be conclusive with respect to that transaction or account involving consumer credit between the creditor and that consumer, so long as that creditor timely creates and thereafter maintains a record of the information so obtained. A creditor may make the determination described in this paragraph (b), and keep the record of that information obtained at that time, solely at the time—

My request on 6/20 is a different transaction than the one I did today.

From the preamble:

In order to facilitate a creditor’s process for responding to a consumer’s inquiry about a loan—which could occur days or a few weeks before the consumer’s application for that loan—as well as to reduce the traffic on the MLA Database, § 232.5(b)(3)(i)-(ii) permit the creditor to make a determination and keep a record of the information so obtained 30 days prior to the date of the transaction or the date the consumer applies to establish an account.

Credit cards are an example where the bank receives an application, does the MLA check and approves the cr card request, but the customer doesn't use the card until the 29th day after the check.

which could occur days or a few weeks before the consumer’s application for that loan-

I'm not disagreeing with the ability to use the determination for 30 days prior to the transaction being completed. What I am contending is that a transaction that I begin today (5/16) and a transaction that I begin on 6/10 are separate transactions and each would need individual determinations.

Just wondering....the DOD website is offering a 24 hour turnaround....is that for batch requests or individual requests? Just asking because i've done a few test runs through there, and the results are instantaneous. I don't see us needing to use the batch option, so i'm trying to foresee problems, but if it remains instantaneous, i don't anticipate any. Is it only instantaneous for now, since it's not really getting traffic?

This is the site i'm using, FWIW: https://mla.dmdc.osd.mil/single_record.xhtml

It is the batch checks could be up to 24 hours. The single checks should always give an instant result. At least, that's the idea. Not sure how it will react on October 3rd with everyone in there at one time.

Thanks CULady....good to know.

Volume and "stuff" happens are why they want to under-promise and over-deliver. The DMDC sounds pretty confident now.

Curiously, for those depending on credit reports...how is that helpful for covered dependents of a covered person?

It's supposed to work the same way as far as i know.....it's up to the active duty service member to properly report their dependents to the DOD; when they do, those people make it into the database as covered dependents. At least, that's how i understand it.

The DOD will have the records of the dependents. Pay is based on how many dependents you have and the DOD will have to have their name, DOB, SSN, etc. So if the DOD has that info, then it will be available on the credit report and the MLA website.

Again, our responsibility is to use on the of the two methods for safe harbor. If it's not there, due to military member omission, DOD mistake, etc, it's not really our problem AS LONG AS you retain the documentation to prove safe harbor.

A question came up during one of our weekly MLA status meetings for loans that have not closed as of 10/3/2016 and how the identification of a covered borrower should be handled for these loans.

A lender can take advantage of the safe harbor which allows a determination to be made and the record of the determination created and kept when a consumer initiates or applies for consumer credit or 30 days prior or when a consumer responds to a firm offer of credit with 60 days after the firm offer was provided (§232.5(b)(3) - Determination and recordkeeping: one-time determination permitted).

The Compliance dates in § 232.13(a) state ..."a creditor must comply with the requirements of the rule with respect to a consumer credit transaction or account for consumer credit consummated or established on or after October 3, 2016.”

I am curious how others will be handling identification of covered borrowers for loans in the pipeline that have not closed as of 10/3.

Good question, I hadn't even thought about that. I think that for those few loans that will be in limbo, we will have the processor do a single request on the DOD website after 10/3. Hopefully, the credit bureau search will be operational sooner than 10/3 and we can do it earlier. I will be interested to see what others have to say on it.

We are also hoping the credit bureau flag option will be functional prior to the implementation deadline. But until then we will also be checking the DoD site to identify covered borrowers and providing the appropriate disclosures.

I would believe you will have to identify loans you will close on or after Oct 3 and follow the new procedures. The switch is on or off on the new rules there is no transition period in the schedule.

The last I heard teh CRAs were all trying to get up and running well in advance. The contracts between the CRAs and DoD is taking longer than anticipated and they can't get live data until the contracts are done. They were working with test data as I understood it, but it seems it will be cut close based on the activity I've heard, or inactivity as the case may be. There was discussion that the associations with pull should ask DoD for a delay because larger volume lenders who completely integrate the CRA process and will depend on it, open themselves to problems if they have to switch now to individual checks. I've not heard if there have been talks on that with those in power.

I had one DoD person assure me that a guidance document was coming out in July to answer some questions the industry has had. We're about half way in and I'm still looking.

I spoke to Nessa from the ABA and this is one of the concerns that is to be in the DoD guidance document. I am hoping the guidance comes out today or early next week. I also saw that all contracts with the CRAs have been executed and signed. We are hoping that the CRAs will be up and running early to be able to rely on the safe harbor.

Is anyone else getting certificate errors when trying to access the DoD website?

Nope. What is the web address? I used https://mla.dmdc.osd.mil/ and it opened just fine.

Oh it's probably our network blocking it then...so frustrating! Thanks

I just got into it with no problems. I used Internet Explorer and Mozilla Fire Browsers.

I am also trying to figure out a process to identify covered dependents. The above appears to mean that the DOD (and eventually the credit bureaus) will have information on a servicemember's dependents, but will this cover applicants who are not servicemembers themselves?

For example, if John Doe applies individually for a covered loan and is a dependent of Jane Doe (assume Jane is an active duty servicemember), would John's credit report show that he is a dependent of Jane's or would only Jane's credit report show that John is a dependent of hers?

The DOD database will have information for both dependents and active duty. So if the credit reporting agencies are pulling directly from the DOD database it will show on the dependents credit report that they are a dependent of an active duty military person. If you were to go put a person's information in the DODs database right now the message below pops up if the person is not active duty or dependent. Hope that helps.

"Based on the information you provided DMDC does not possess information indicating that the individual is either on active duty for more than 30 days or a family member of a service member on active duty
for more than 30 days based on the Status Inquiry Date."

Thanks Minion!

None of the vendors we use for credit reporting are ready yet - and we intend to rely on that for our determination but I am getting worried that they aren't ready and the date is approaching quickly. Has anyone had any feedback that any of the bureau vendors are ready or even the direct reports from the bureaus? We either get no answer at all or that they aren't ready every time we ask....

Last I heard Transunion was going to be ready. If they are not, we will have to use the DOD website and key in each applicant. Is it ideal, no, but it will still be possible to continue business as usual and still obtain safe harbor.

Equifax is being utilized by our LOS and they report they have executed the contract with the DoD and are currently working to test production data. Our LOS should have the updates rolled out in another week...we will see....

If you are planning to use the DOD database to check borrower status, how do you plan on retaining documentation of this for the safe harbor purpose?

I think the most conservative process would be to print the input screen showing the identification information entered and then print the certificate page showing the result and place that in the loan file.

Or do you think it is acceptable to retain only a document from your loan origination software that states the date the status was checked, the method used to check, and the result. Example:
Borrower= John Rambo
Method of Verification=MLA Database
Date Verified=10/03/16
Covered Borrower= No

We will print the screen from the DOD database and scan it with the file. I don't think a reference in the LOS that basically says "we did it" would cut it--at least, that's the way i'm treating it.

We will be printing the screen from the DOD website showing the status. Agree that the LOS isn't going to be enough.

We pulled data on an active member earlier this week and received the message below, so we are wondering if the MLA site is working correctly or not....

"Based on the information you provided DMDC does not possess information indicating that the individual is either on active duty for more than 30 days or a family member of a service member on active duty
for more than 30 days based on the Status Inquiry Date."

I thought that in order to use the DoD website for verification one had to apply with the DoD and be approved. I did this and was denied but yet I can access the site and get information. Does anyone know if I am confusing this requirement with something else?

Initially they had you register for access (batch processes maybe?). The website is available publically.

I just tested a dependent of an active member and it came back with "DMDC does possess information that the individual is either on active duty...". So I am wondering if they do not have everyone updated or you may have entered in incorrect information.

I had registered with DOD back in January to do a direct look up by sending an email to them. I don't believe that I received a reply so now I'm wondering do I just need to establish a login ID for department of defense website to do that direct pull or should I have received something from DOD? I'm waiting on our vendor for credit bureau pull capabilities, but if they aren't ready I need to be able to look up direct.

We were denied also from the DOD. I emailed them a couple of weeks ago and stated that our CRA had not completed processes. I received a response with the User Guide for the website attached. We tested it for our Trust Department that manages rental property on renters they were going to evict. It came back that they were not active servicemembers. My Son-in-law is active duty so I put his SS# in and it replied that he was active duty. I think you only need to set up an account if you are processing batch inquiries. We were told yesterday by our Rep that Transunion was ready. Question: Are you going to check on all your Consumer Non-Residential installment loans. I'm afraid if I train on all the ifs, buts, ands they will forget to do on loans that are covered?

A couple co-workers went to a user group meeting for our loan processing software provider last week and were told they were pretty confident that the DOD would extend the compliance deadline. Anyone else hear any rumors about an extension? First one I'd heard and I told my staff not to count on an extension.

The ABA released an update concerning a meeting held with the DoD on 8/2/2016. The memo stated they and other trade associations had emphasized the need for an extension of the compliance date and during that meeting the "DoD indicated it would not be extending the mandatory compliance date."

This is all I have heard on the subject, so my hopes are very slim.

I know CUNA requested they push out the mandatory compliance date six months. But I wouldn't count on it.

I'm hoping after their clarifications opened up so many new questions that they reconsider, but won't count on it.

We received communication from our Equifax rep that things are up and running and were given instructions on how to access the test environment. Between that and our forms vendor, things are going well, but our loan processing system (with Fiserv) is definitely dragging behind and leaving us very nervous that they won't be ready in time, at least not enough time to even allow a test.

Although not common, any thoughts on how to handle a new customer that may not have a social security number (yet)?