In what has been a rare occurrence in recent months, given a successful effort by the White House and Republicans to scale back its reach, the Consumer Financial Protection Bureau is seeking to legislatively expand its purview and better police financial products targeted to military personnel.
Director Kathleen Kraninger has asked Congress to grant the Bureau “clear authority to supervise for compliance” with the Military Lending Act.
“The Bureau is committed to the financial well-being of America’s service members. This commitment includes ensuring that lenders subject to our jurisdiction comply with the Military Lending Act so our service members and their families are provided with the protections of that law,” she said in a statement last week. “That’s why I have asked Congress to explicitly grant the Bureau authority to conduct examinations specifically intended to review compliance with the MLA. The requested authority would complement the work the Bureau currently does to enforce the MLA.”
Kraninger said she was pleased to see legislation proposed recently in the House of Representatives (H.R. 442) that is intended to grant the Bureau such authority. To bolster that effort, the CFPB recently delivered a similar legislative proposal to Speaker of the House Nancy Pelosi and Vice President Pence in his capacity as president of the U.S. Senate.
In August 2018, in an effort “to protect soldiers and their families from abusive financial practices,” all 49 Democrats in the U.S. Senate were signatories to a letter delivered to former CFPB interim director Mick Mulvaney. It urged him and other Trump administration officials “not to abandon their duty to protect our servicemembers and their families.”
The letter responded to reports that the Bureau had considered no longer enforcing the MLA as part of lender examinations due to a purported lack of legislative authority. The initiative was led by Jack Reed, a Rhode Island Democrat who is ranking member of the Armed Services Committee.
In 2006, Congress passed the MLA to address the issue of high-cost credit as a threat to military personnel and readiness. In July 2015, the Department of Defense issued a final rule expanding the types of credit products that are covered. The protections provided by the MLA extend to active-duty service members (including those on active Guard or active Reserve duty) and covered dependents.
When lending to service members and their dependents, creditors must abide by the following requirements:
- A 36 percent rate cap: Creditors cannot charge more than a 36 percent Military Annual Percentage Rate, a cap that generally includes the following costs (with some exceptions): finance charges, credit insurance premiums or fees, add-on products sold in connection with the credit extended, and other fees such as application or participation fees.
- No mandatory waivers of consumer protection laws: Creditors cannot require service members or their covered dependents to submit to mandatory arbitration or give up certain rights under state or federal law, such as the Servicemembers Civil Relief Act.
- No mandatory allotments: Creditors cannot require service members or their covered dependents to create a voluntary military allotment in order to qualify for a loan.
“For generations, Americans have set partisanship aside and have made every effort to provide servicemembers and their families with all the resources and protections they deserve,” the past letter to Mulvaney says. “We ask no less of you and, as such, seek your commitment that you will continue the CFPB’s tradition of ensuring that servicemembers and their families receive all of their MLA protections by utilizing all of the authorities available to the CFPB.”
Senate Democrats spearheaded the creation of the Office of Servicemember Affairs at the CFPB to serve as an independent watchdog for military personnel. It focuses on consumer financial challenges affecting service members and their families. It empowers service members through financial education and works with CFPB examiners to ensure consumer protections are made available to service members while also monitoring complaints submitted by consumers to the Bureau and coordinating with other federal and state agencies on military consumer protection measures. The office has handled more than 90,000 consumer complaints from service members and their families.
The letter stressed that CFPB examinations and the Office of Servicemember Affairs have been “critical components of ensuring the detection and prevention of risks to military consumers.”