House Democrats Urge CFPB to Enforce Military Lending Act

Inside Subprime: Jan 21, 2019

By Grace Austin

House Democrats are placing greater pressure upon the Consumer Financial Protection Bureau to enforce financial protections for servicemembers, after taking control from Republicans in last November’s elections.

In December 2018, the U.S. House Committee on Financial Services new chair, Rep. Maxine Waters, D-California, along with about two dozen Democratic colleagues, sent a letter to new CFPB head Kathleen Kraninger, urging the consumer financial protection watchdog agency to go after lenders that violated the Military Lending Act.

The letter stated that members of the military and their families continue to be victims of financial fraud and predatory behavior, and that the CFPB needs to recommit to taking a more active stance against those actors that contravene the MLA.

The MLA, passed in 2006, places stricter restrictions on “certain lending practices,” such as short-term, high-interest loans like payday loans and title loans. The MLA caps interest rates on loans to servicemembers at 36 percent, puts limits on loan terms, bans mandatory arbitration clauses and prepayment penalties, and restricts other bad practices.

Consumer and military advocacy groups generally support the MLA and its attempts to prevent financial difficulties for service members, which in turn impacts military readiness and retention in the armed forces. These groups have expressed outrage over steps by the CFPB to overhaul some of the legislation’s key components.

In August 2018, the New York Times reported on the CFPB’s plans to scrap routine exams of lenders in potential violation of the MLA. Acting Director Mick Mulvaney’s reason was that it was not specifically mandated by the MLA.

The New York Times article detailed that the move against the MLA was questioned by some, as “the consumer bureau conducted dozens of investigations into payday loan providers and other lenders during the Obama administration without any significant legal opposition, and no lenders are currently challenging its oversight based on the law, according to administration officials.”

The Pentagon, which largely stays out of weighing in on political or policy news, said it was not notified about those potential changes to the MLA.

Soon after, in October 2018, 30 of the nation’s attorney generals, and the District of Columbia, sent a letter to the CFPB warning the agency not to roll back the supervised examinations of lenders.

Rep. Waters said in January 2019 that she planned on making the CFPB a priority during the upcoming congressional session, and criticized Mulvaney’s leadership at the agency.

Meanwhile, the tough rhetoric indicates a difficult road ahead for Kraninger, if she plans to pursue the same course as her predecessor. During her confirmation hearings, Kraninger suggested she would follow a similar agenda as Mulvaney.

That’s not to say there are not those advocating against what some have called overly burdensome regulations, including those in the financial services industry, such as banks and credit unions.

But strong stances and changes in House leadership mean the CFPB will likely be a central focus for some Democrats in the 116th Congress.

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