Pentagon and CFPB at Odds Over Military Payday Loan Protections
Inside Subprime: Sept 24, 2018
By Grace Austin
The Pentagon is saying it’s been kept out of the loop on potential Consumer Financial Protection Bureau decisions to scale back financial protections for service members.
That’s as the Trump administration prepares to make changes to the bipartisan Military Lending Act. That law was enacted just before the Great Recession, in 2006, to protect the troops from lending practices that “pose a risk” to them and their families and thus “military readiness.”
It includes short-term lending, through title and payday loans, which can have interest rates up to 600 percent. The Military Lending Act limits what APR lenders can charge active-duty service members to just 36 percent.
Short-term lending is a cyclical process that is difficult to get out of — one must often have to take out another loan to pay the previous, and so on and so on, because of high interest rates and additional fees. And a 2014 DoD report shows that 11 percent of enlisted troops report using risky short-term lending like payday loans and don’t have access to “safe, low-cost” loans.
The new regulations would mean the watchdog agency would stop actively looking for violations of the law, instead investigating complaints when they come to the CFPB’s attention. It would be up to the service members to notify the agency about any potential fraud.
The Pentagon says they were unaware of these new proposed changes, instead learning of them through the media.
Currently, the CFPB’s Office of Servicemember Affairs touts some strong numbers: more than 74,000 complaints from military members dealt with since 2011, and $130 million in relief for those who’ve been financially defrauded.
But that could be in jeopardy if the CFPB moves forward with this policy, just one of many by acting director Mick Mulvaney to reduce the watchdog agency’s reach.
Dozens of Democratic senators and two Independents have since asked the Trump administration via letter to keep the regulations, and veterans’ advocacy groups have actively lobbied against the moves.
Read the all Subprime Reports and check out the following reports including:
Alabama | Alaska | Arizona | California | Delaware | Florida | Georgia | Hawaii | Idaho | Illinois | Indiana | Kansas | Kentucky | Michigan | Minnesota | Mississippi | Missouri | Montana | Nebraska | Nevada | New Mexico | North Dakota | Oklahoma | Ohio | Oregon | South Carolina | South Dakota | Tennessee | Texas | Utah | Washington | Washington DC | Wisconsin | Wyoming | Virginia