WASHINGTON, D.C. – Today, nearly half the Senate, including Senate Armed Services Committee Ranking Member Jack Reed (R.I.), Banking Committee Ranking Member Sherrod Brown (Ohio), and Minority Leader Chuck Schumer (N.Y.), wrote the Consumer Financial Protection Bureau (CFPB), urging it to reverse course on its decision to halt examinations of payday and other lenders for violations of the Military Lending Act (MLA). This letter comes as news reports show the Mick Mulvaney-led CFPB decided to stop this supervision and the White House is pushing to weaken the MLA to allow auto-lenders to overcharge servicemembers hundreds of dollars annually for “gap insurance.”
Center for Responsible Lending (CRL) Federal Advocacy Director, Scott Astrada, issued the following statement:
“Given the opportunity, predatory lenders will target military servicemembers and pull them into horrific debt traps. The bipartisan Military Lending Act has helped put an end to these shameful practices. We applaud these senators for calling on the CFPB to fulfill its obligation of stopping loan sharks from preying upon servicemembers and their families.”
The Senate letter states, in part, “it is unreasonable to place the burden of detecting and reporting MLA abuses on servicemembers, especially when they should be given every opportunity to focus squarely on their missions. What the CFPB is reported to be contemplating is equivalent to forcing our armed forces to stop using radar, sonar, and other early warning technologies and instead react to threats as they occur.”
Text of the letter follows:
August 15, 2018
Office of Management and Budget
725 17th Street, NW
Washington, DC 20503
Dear Director Mulvaney:
We write regarding reports that the Consumer Financial Protection Bureau (CFPB) will no longer protect servicemembers and their families by including the Military Lending Act (MLA) as part of the CFPB’s routine lender examinations due to a purported lack of authority. These reports are puzzling because the CFPB already possesses the authority to enforce the MLA and examine many types of lenders for the purposes of “detecting and assessing risks to consumers and to markets for consumer financial products and services.” The CFPB should not be abandoning its duty to protect our servicemembers and their families, and we seek your commitment that you will utilize all of the authorities available to the CFPB to ensure that servicemembers and their families continue to receive all of their MLA protections.
By enacting the MLA, Congress sent a clear bipartisan message that high-cost lending is a clear risk to military consumers that must be addressed to also protect military readiness. Indeed, among its provisions, the MLA caps the annual interest rate for an extension of consumer credit to a servicemember or his or her dependents at 36%. CFPB examinations and the CFPB’s Office of Servicemember Affairs have been critical components of ensuring the detection and prevention of risks to military consumers. Such examinations serve as the early warning system for MLA deficiencies so that they do not snowball into costly losses for servicemembers and avoidable litigation costs and penalties for lenders.
Given your senior role at the Office of Management and Budget, we are sure you are aware that the MLA also helps the Department of Defense (DOD) to save taxpayer funds based on the following DOD justification for its MLA rule:
“Losing qualified Service members due to personal issues, such as financial instability, causes loss of mission capability and drives significant replacement costs. The Department estimates that each separation costs the Department $58,250. Losing an experienced mid-grade noncommissioned officer (NCO), who may be in a leadership position or key technical position, may be considerably more expensive in terms of replacement costs and in terms of the degradation of mission effectiveness resulting from a loss of personal reliability for deployment and availability for duty.”
Needlessly stopping MLA examinations altogether and choosing instead to rely on reports of MLA violations after they occurred is further perplexing given that the CFPB is already conducting lender examinations of credit products that are also subject to the MLA. Such a policy decision would be both inefficient and irresponsible to require a CFPB examiner to ignore as part of his or her examination risks to military consumers who are protected by the MLA. In addition, for our servicemembers, especially those who are deployed overseas facing hostile fire, it is unreasonable to place the burden of detecting and reporting MLA abuses on servicemembers, especially when they should be given every opportunity to focus squarely on their missions.
What the CFPB is reported to be contemplating is equivalent to forcing our armed forces to stop using radar, sonar, and other early warning technologies and instead react to threats as they occur. No one would force our armed forces to do so, and the CFPB should not similarly force any of its examiners to turn a blind eye. For generations, Americans have set partisanship aside and have made every effort to provide servicemembers and their families with all the resources and protections they deserve. We ask no less of you and, as such, seek your commitment that you will continue the CFPB’s tradition of ensuring that servicemembers and their families receive all of their MLA protections by utilizing all of the authorities available to the CFPB. We request that you respond with your commitment no later than Monday, August 20.