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Do MLA requirements apply when the loan request is for the purchase or refinance of motor homes, recreational vehicles (RV), golf carts or motor scooters?

In the MLA examination procedures, in the section explaining what the types of consumer credit covered, a footnote describing the exemption for credit transactions "expressly intended to finance the purchase of a motor vehicle" explains, "For purposes of MLA the term"vehicle' includes any self-propelled vehicle primarily used for personal, family or household purposes for on-road transportation. The term does not include motor homes, recreational vehicles (RV), golf carts or motor scooters." My bank offers both purchase and refinance loan for RVs. Does this footnote mean that purchases of an RV are covered for MLA purposes? Or does it mean that the bank may ignore the MLA requirements when the loan request is for the purchase or refinance of such items?

Your questions basically reflects understandable confusion about the distinction between coverage under the regulation and prohibitions of the regulation.

First, let us address loans used to purchase an RV, which has to do with to coverage. Loans used to purchase vehicles and personal property are exempt. Thus, even if an RV is not a “vehicle,” it would appear to be “personal property.” Accordingly, a loan to finance the purchase of an RV is exempt.

Second, let us address the refinancing of the RV. Unlike loans to purchase vehicles and personal property, loans to refinance such items are covered. Thus, your bank must comply with regulation. There may be some confusion about refinancings due to the regulation’s prohibition against nonbanks refinancing certain loans. However, those prohibitions do not apply to banks.

Finally, the narrow definition of vehicle is most relevant to the regulation’s prohibition against nonbanks making loans secured by the “title of a vehicle.” While under the definition of “vehicle,” nonbanks cannot make loans secured by automobiles to covered borrowers, they may make loans secured by the title to an RV, golf cart, mobile home, or motor scooter to covered borrowers. Presumably, the thinking is that these loans do not pose the same risks as loans secured by a car, which is needed for transportation, and that covered borrowers need and value such loans. (October 2016)

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