CFPB Asks Congress for Clear Authority to Assess Compliance with the Military Lending Act

Inside Subprime: Feb 25, 2019

By Grace Austin

The Consumer Financial Protection Bureau is asking Congress for more transparent authority to enforce the Military Lending Act, which was enacted to prevent servicemembers from being financial victims of fraud, exploitative lenders and abusive credit cards.

In a statement released in January 2019, Director Kathleen Kraninger said she asked Congress to give the bureau “clear authority” to oversee examinations of lenders to make sure they are following the legislation, first passed in 2006.

Kraninger went on to say she hopes recent U.S. House of Representatives legislation passes through Congress that would allow the CFPB to enforce compliance.

The MLA restricts lenders, including payday and title lenders, from charging more than 36 percent on loans. Before the legislation was passed more than a decade ago, military servicemembers were reporting widespread abuse by lenders, leading advocates and leaders in the armed forces to push for legislation that would stop the financial bad practices that they say hurts military readiness.

The MLA applies to all active-duty military and their families.

The CFPB sent a legislative proposal along with the statement, to the speaker of the House; vice president; and chairs and ranking members of the Senate Committee on Banking, Housing and Urban Affairs and the House Committee on Financial Services.

That proposal would make sure lenders are complying with the MLA, obtain information about the lenders’ compliance systems, and help detect risk for consumers and in markets for consumer finance.

While the move could be viewed by some as a way to keep servicemembers and their families financially safe, others may see it as contradictory to recent action taken by the bureau.

During former acting director Mick Mulvaney’s tenure, he announced that the CFPB planned to end those routine examinations for MLA compliance, saying the CFPB didn’t have specific authority to do so. That’s despite the bureau conducting those exams for several years.

Mulvaney favored a less bureaucratic approach to the CFPB, often saying that the Dodd-Frank Act did not give the agency the power to take certain actions.

That move was criticized by some lawmakers, consumer advocates, and military and veterans’ groups. The Department of Defense even said it wasn’t informed about the potential shift away from routine examinations and was still behind the MLA.

In a January 2019 interview with the Military Times, Kraninger defended the decision, saying that “it makes perfect sense to make sure that Congress clarifies [the authority]. “As we’ve looked at our authority, it’s not clear in this respect.”

Kraninger went on to say she wants the bureau to be able to conduct specific MLA exams of lenders. “What we’re seeking is narrow, explicit authority to do exams particularly on the MLA,” she told the Military Times, “to actively go in and do a concerted MLA-related exam.”

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