CFPB neglects duty to enforce Military Lending Act

Center for Responsible Lending

Although predatory lending often conjures up images of an economically blighted urban America, seldom does the image of an enlisted man or woman come to mind. But just as check cashing stores and auto title loan shops focus on communities of color, America’s military is also a frequent target.

For years, near military installations across the country, a profusion of predatory lenders plied their wares, capturing our service men and women into the same web of debt-trap loans that ensnared Black and Latino civilians.

By 2006, a Department of Defense report that delved into predatory lending practices against the nation’s armed services shared how the financial stress affected military readiness.

The report shared how predatory lending resulted in multiple negative effects, from “undermining troop readiness” and morale to even the revocation of security clearances essential to military operations.

In part, the report stated, “Most of the predatory business models take advantage of borrower’s inability to pay the loan in full when due and encourage extensions through refinancing and loan flipping. These refinances often include additional high fees and little or no payment of principal.”

In reaction to the DOD report, Congress enacted with bipartisan support the Military Lending Act.

Drawing from the report’s recommendations, new military protections assured a 36 percent interest cap for all costs associated with lending, included both military members and their families, and banned extensions of payday and auto title loans or other types of predatory credit.

By 2010, with the enactment of the Dodd-Frank Wall Street Reform and Consumer Protection Act, the newly-created Consumer Financial Protection Bureau gave the nation, for the first time, a full-time consumer cop on the block, dedicated to financial fairness over a wide range of services and products.

In 2012, the National Defense Authorization Act authorized the CFPB to enforce the MLA. That legislative move enabled CFPB to use its authority to protect servicemembers.

Soon thereafter, veterans, military members and their families took more than 72,000 lending complaints to the direct attention of the CFPB. Under the leadership of the Bureau’s first director, CFPB returned more than $130 million to the military community.

For several years, the CFPB conducted proactive supervision to verify that financial companies were honoring their obligations under the MLA – to not rip off our troops. Furthermore, the MLA itself was strengthened by DOD policy, which closed loopholes that lenders had been exploiting to rip off our servicemembers.

Despite this multi-year drumbeat of consumer concern at the federal level, this year the current acting director of the CFPB recoiled from Dodd-Frank’s statutory duty to veterans. Earlier this year, instead of continuing its inclusion of MLA in CFPB supervisory examinations, Mick Mulvaney, CFPB’s acting director, claimed that the agency has no such legal authority.

In reaction, a bipartisan contingent of 33 state attorneys general directly expressed their concerns regarding CFPB’s abdication of duty to the armed services. AGs, representing coast-to-coast diversity in geography and economies, wrote on behalf of consumers from New England’s Vermont, the mid-Atlantic’s North Carolina, the Midwest heartland of Illinois and Ohio, the Deep South’s Mississippi, and westward to Colorado’s Rocky Mountain and the most populous state, California.

“We are perplexed by reports indicating that the CFPB has determined that it needs further statutory authority in order to conduct examinations for MLA violations,” wrote the AGs. “We are also disappointed to learn that CFPB did not consult the Defense Department in developing its new examination policy, even though Congress specified that the Defense Department – not the CFPB – is the primary federal agency responsible for interpreting the MLA.”

“By eliminating the proactive examination of compliance to correct problems before they affect service members, however, your proposal will limit the CFPB’s protection of service members to reactive enforcement when service members submit complaints,” added the AGs.

Nor were governmental officials the only ones to speak up in defense of the MLA.

The Consumer Federation of America, an association of nonprofit interests that together have used a combination of education, research and advocacy to protect consumers since 1968, released a report that challenges CFPB to Protect Those Who Protect America. Written by Christopher L. Peterson, CFA’s director of financial services, it rejects Mulvaney’s interpretation, and itemizes specific directives and requirements that together pose a legal argument that would be difficult to deny or disprove.

“For some inexplicable reason, the Trump administration is directing the CFPB to overlook illegal, usurious lending to our troops within supervisory exams,” said Peterson. “America’s military families deserve the protection from predatory lending offered by the Military Lending Act – not to be abandoned by the CFPB.”

Veterans are also expressing their own heartfelt concerns about the unexpected reversal of consumer protection.

In a recent blog, Melissa Bryant, a member of the Iraq and Afghanistan Veterans of America, also spoke up.

“We know that service members are four times more likely to be targeted by predatory lenders and are in desperate need of stringent oversight and protection measures from fraud,” said Bryant. “If you need further proof, just look down the main drag of any street leading into a military post, full of payday lenders and car dealerships who prey upon young troops with little or no credit, but a steady paycheck to spend.”

And in a recent town hall convened by CFPB in Baton Rouge, a commander with the state’s branch of the American Legion faced off with Mulvaney.

Speaking on behalf of veterans, Ricky Griffin told the acting director, “Both the Pentagon and the American Legion are extremely worried about your proposal to pull back on enforcing the Military Lending Act. … With the military currently unable to make its recruitment numbers this year, I think it is wrong for your agents to back off of any enforcement of the Military Lending Act. … Why single out military service members?”

He, and all of America’s military, deserve an answer.

Charlene Crowell is the communications deputy director with the Center for Responsible Lending. She can be reached at


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