Q: Are vehicle loans between individuals considered to be covered loans where the loans are secured by the vehicle?
A: Only if the individual making the loan is considered to be a creditor engaged in the business of extending consumer credit. The MLA and its regulations apply to extensions of credit by a creditor, which is a defined term.
Specifically, a creditor is someone who is in the business of extending covered consumer credit or its assignee. The final rule explains that for purposes of the MLA regulation, a person is engaged in the business of extending consumer credit if the person considered together with its affiliates meets the transaction standard for being a creditor under TILA and Regulation Z.
If the individual extending credit is not considered a creditor for purposes of TILA and Regulation Z, the individual does not become a creditor for purposes of MLA. And if you want to know more about the definition of creditor under Regulation Z, I'll direct you to 12 CFR 1026(a)(17) especially (i) and (iv). Additional information about the term creditor appears in the official staff commentary on Regulation Z.
But to be clear, this answer responds to a question about transactions between individuals. Most of the people listening today probably are credit union employees. If your credit union has to comply with TILA and Regulation Z, it is a creditor for purposes of MLA.
Another factor relevant to answering the question about a transaction between individuals is whether the transaction is considered consumer credit. And we went over that definition earlier in the presentation, but just to hit it pretty quickly, because we're nearing the top of the hour, it has to be extended to a covered borrower primarily for personal, family, or household purposes and it must either one, be subject to a finance charge, or two, be payable by written agreement in more than four installments. So, unless the individual meets these standards, the transaction is not subject to the MLA or its regulations.