CFPB policy on military lending supervision 'unacceptable,' says consumer group

by Francis Monfort04 Nov 2018

The Consumer Financial Protection Bureau has the statutory authority to ensure compliance with the Military Lending Act (MLA), according to an analysis by the Consumer Federation of America (CFA).

The analysis follows an announcement by the CFPB of plans to end supervisory examinations for violations of the MLA.

“It is completely unacceptable for the Trump administration to abandon those who have sacrificed in defense of our country,” said CFA Director of Financial Services Chris Peterson, author of the report.

The MLA was passed in 2006 to address predatory lending affecting military personnel by capping interest rates on loans made to service members and their families at 36% and prohibiting the extension of payday loans, vehicle title loans, and other types of harmful credit products to military personnel.

While the CFPB has conducted supervisory examinations under the MLA since 2012, the agency is now claiming that it does not have the statutory authority to carry out preventative supervisory audits.

The CFA said that its analysis shows that the CFPB’s claim is categorically false. The CFBP’s enabling statute, the Consumer Financial Protection Act (CFPA), as well as the MLA itself provide for its supervisory authority, CFA said.

For example, violations of the MLA render service members’ loans void, thereby triggering concurrent violations of federal consumer financial laws under CFPB’s supervisory jurisdiction. Additionally, the MLA requires the CFPB to enforce the MLA the same way that the CFPB enforces the Truth in Lending Act and expressly directs the CFPB to use “any other applicable authorities available.”

The analysis further showed that under the CFPA, the CFPB can cover MLA violations within its exams for the purpose of “detecting and assessing risks” to consumers. Finally, federal law directs the CFPB to “obtain information” about “compliance systems or procedures” of large banks and payday lenders covered by the MLA.

“For some inexplicable reason, the Trump administration is directing the CFPB to overlook illegal, usurious lending to our troops within supervisory exams,” Peterson said. “America’s military families deserve the protection from predatory lending offered by the Military Lending Act—not to be abandoned by the CFPB.”