Release and Implementation of 32 CFR Part 232

1
Release and Implementation of 32 CFR Part 232

• Association of Military Banks of America
• Fall Workshop
• Grove Park Inn, Ashville, NC
• September 17, 2007

2
Regulation Development Game Plan

• Request for written input Federal Register
  response
• Informal meetings with trade groups, financial
  companies and advocacy groups
• DoD and Military Services drafting and Federal
  Agency comments and OMB clearance
• Publish proposed regulation in Federal Register
  (Apr Jun)
• Send to OMB (Aug)
• Post final regulation (NLT Aug 31st)

3
Response to Comments

• Only technical corrections made to the proposed
  rule
• Final rule reflects comments and responses in
  preamble
• Financial institutions continue to request
  exemption
• Response all issues will be reviewed if there
  are changes to the regulation
• Consumer groups continue to voice concern over
  scope
• Response DoD will continue to monitor and react
  to changes in the marketplace
• Includes explanations of clarifications and
  technical changes
• Payday lenders expressed disappointment DoD does
  not recognize the beneficial nature of their
  product
• Refund anticipation loan providers stated that
  they should not be included in covered credit
  products

4
Final 32 C.F.R. Part 232

• Limits scope to payday loans, auto title loans
  and refund anticipation loans
• Consider as sustaining debt or unnecessary high
  cost
• Can differentiate from more productive credit
  products
• Recognize alternatives for Service members and
  families should consider
• Does not exempt financial institutions
• Resolves identification issue with declaration
  and oral disclosure with toll-free number
• Includes provisions to support low cost
  alternatives

5
Media Coverage

• American Bankers Association "The final
  regulation wisely focuses on the real-life abuses
  ... ," said Wayne Abernathy, ABA executive
  director of financial institution policy and
  regulatory affairs. "At the same time the Defense
  Department leadership was careful to preserve
  access to beneficial financial products, such as
  student loans, residential mortgage loans,
  refinancing, reverse mortgages, home equity
  loans, home equity lines of credit, along with
  other collateralized products."

6
Media Coverage

• Center for Responsible Lending (CRL) "It's
  disappointing, and unfortunate," said Kathleen
  Keest, senior policy counsel for CRL, "because
  not only can bankers 'live with' the final rules,
  as they told the press last week, but so can
  payday lenders and title lenders who prey on our
  troops and their families."

7
Media Coverage

• Community Financial Services Association (CFSA)
  "As a result of the DOD report and resulting
  legislation, service members will no longer have
  access to payday loans to help with their
  unbudgeted expenses," said Darrin Andersen,
  President of CFSA . "Going forward, the
  fallacies of that recommendation, as pointed out
  by the GAO, should give pause to those who
  believe the legislation was based on sound
  research," Andersen concluded.

8
GAO Review of DoD Report

• Requested by Sen Tim Johnson, endorsed by Sen
  Graham
• Objective Review methodology, consultations and
  support of recommendations
• Findings
• Consultations occurred, but report did not
  characterize extent
• Limitations in methodology
• Some recommendations not supported by report
  findings
• Other GAO impressions
• DoD Report findings substantiated by recent base
  visits
• DoD report hampered by 180 day limit
• Sen Johnsons staff requested the report be made
  public August 31, 2007

9
Post October 1, 2007

• Publicize the rule within DoD and monitor use of
  credit by Service members and their families
• Continue to educate Service members and families
  on appropriate use of credit
• Provide interpretations of the regulation (with
  assistance from Federal regulators)
• Complete the accompanying DoD Instruction which
  outlines internal responsibilities

10
SASC Report Requirement

• SASC Report 110-077 National Defense
  Authorization Act for FY 2008
• SASC expresses concerns
• State enforcement
• Installment loans
• Requests DoD submit a report April 1, 2008
• Implementation
• Recommendations for statutory or legislative
  changes

11
State Enforcement

• Continue to develop relationships with state
  governments
• Obtain assistance from national associations
  (NACCA, NASCUS, NAAG, etc)
• Establish agreements where productive

12
Initial Assessment of State Enforcement
VT 52
NH 50
7
42
44
32
43
30
46
40
MA 34
41
25
49
8
38
36
RI 48
17
13
27
16
35
31
12
CT 37
23
45
20
3
14
NJ 28
1
21
15
4
29
DE 47
MD 9
19
33
10
18
24
6
22
2
5
26
11
Useful limits and ability/willingness to
enforce Limited laws and/or pending decisions Not
able/willing to enforce
Number in state/territory represents the ranking
by size of total force and families residing
within the state.
13
Answering SASC Report

• Gather information from variety of sources on
  changes in the marketplace
• Use of credit
• Production of credit
• Review installment loan issue
• Input from consumer advocates
• Banks and other financial institutions
• Federal and state regulation
• Consider all potential solutions to problems
  identified
• Options from regulators
• Changes to the regulation
• Potential new legislation