Advocates Again Ask CFPB to Protect Service-Members from Payday Loans
By Lindsay Frankel
Advocates from a number of military and veterans organizations are once again urging the Consumer Financial Protection Bureau to resume its routine examinations for violations of the Military Lending Act.
The CFPB has conducted examinations for compliance with the act for years, ensuring that payday loan firms do not charge more than 36 percent APR on loans issued to service-members and their families. However, these examinations were halted last year, when then-acting Director Mick Mulvaney called into question the agency’s authority to enforce the legislation.
Payday loans issued to the civilian community carry average annualized interest rates of almost 400 percent, according to the bureau. These costly loans are unaffordable for most borrowers. Before the Military Lending Act was passed in 2006, payday lenders were known to target service-members, concentrating their storefronts around military bases and providing high-interest loans to financial desperate military members.
“We continue to wonder why, if CFPB has the authority to supervise for compliance with other federal consumer finance laws, why wouldn’t they have authority to supervise for compliance with the Military Lending Act?” said Jen Davis of the National Military Family Association. Other groups represented included The Veterans of Foreign Wars, American Legion, the Military Officers Association of America, and Iraq and Afghanistan Veterans of America.
In January, the CFPB asked Congress for the “clear authority to supervise for compliance with the Military Lending Act.” But advocates believe the CFPB already has the authority to protect service-members from payday loans. Last year, several groups initiated a $250,000 campaign intended to raise awareness about the financial harm caused when payday lenders target service-members.
While the organizations have not yet identified evidence of disreputable lending practices against military members, advocates expressed concern that the CFPB is not being more proactive at preventing abuses.
Some lawmakers believe legislation is needed to reverse the Trump administration’s dismantling of the bureau’s mission to protect consumers. Rep. Maxine Waters introduced a bill that would clarify the bureau’s ability to enforce the MLA, among other provisions.
The CFPB responded in an email that the agency’s request for explicit authority to conduct the examinations shows the commitment to protecting service-members and their families. “Director Kraninger will continue to work with Congress to advocate for passage of this legislation. The Bureau will continue to protect servicemembers through enforcement and coordination with other agencies as well as focusing on education efforts that empower military personnel to make informed financial decisions,” the email states.
Until then, Davis notes that “any effort to detect fraud is now on the shoulders of service members and families.” She advocated for educating service-members about their protections under the MLA and the process for submitting complaints.