Reed: Trump Administration’s Decision to Stop Shielding U.S. Troops from Predatory Lending Could Harm Military Families & Negatively Impact Readiness
WASHINGTON, DC – As President Trump’s appointee to the Consumer Financial Protection Bureau (CFPB) signals the agency will no longer use its authority and tools to actively protect U.S. military personnel from predatory lenders and ensure compliance with the Military Lending Act (MLA), U.S. Senator Jack Reed (D-RI), the Ranking Member of the Armed Services Committee, says the move is a blow to servicemembers and military families and could have a negative impact on military readiness.
Reed is calling on the Trump Administration to reverse course and urging the CFPB not to abandon its duty to protect our servicemembers and their families under the Military Lending Act.
“Predatory lenders relentlessly target our troops and the Trump Administration’s unwillingness to protect the men and women who defend our country is indefensible. Instead of sticking up for vulnerable soldiers and their families, Trump’s CFPB is siding with payday lenders who are saddling military families with unfair, unnecessary debt.” said Senator Reed. “The Trump Administration seems intent on trying to remove the word ‘protection’ from the CFPB’s responsibilities. Director Kraniger doesn’t need new authority, she just needs to do her job and use all of the CFPB’s existing authorities to ensure our servicemembers and their families continue to receive all of their MLA protections.”
The MLA was passed in 2006 with bipartisan support to help safeguard active-duty military members and their families from financial fraud, predatory loans, and credit gouging. The law caps the annual interest rate for an extension of consumer credit to a servicemember or his or her dependents at 36%.
But under the Trump Administration, then-Acting CFPB Director Mick Mulvaney attempted to roll back consumer protections for U.S. troops by halting the examination of financial firms for compliance with the Military Lending Act.
A November 2018 report by the Consumer Federation of America, Missing in Action? Consumer Financial Protection Bureau Supervision and the Military Lending Act, documented and confirmed CFPB’s statutory authority to ensure MLA compliance. The report also highlights the fact that “under the Trump Administration, the CFPB’s political leadership overruled the recommendations and legal advice of CFPB’s professional staff.”
“Our troops make incredible sacrifices to serve our nation. They deserve a strong, independent consumer watchdog to look out for their financial well-being,” stated Senator Reed. “Military readiness goes hand in hand with strong consumer protections. Our forces on the front lines must be able to focus on the mission at hand without having to worry about financial problems or scams back home. I helped create the Office of Servicemember Affairs at the CFPB so that military families would have someone to turn to and a place that could assist them with financial questions. Instead of shirking their duty, the current CFPB leadership should make every effort to protect our troops.”
In 2010 Senator Reed authored the provision of law creating the Office of Servicemember Affairs at the CFPB to serve as an independent watchdog for military personnel. The office focuses on consumer financial challenges affecting servicemembers and their families. It empowers servicemembers through financial education and works with CFPB examiners to ensure that all consumer protections are made available to servicemembers, while also monitoring complaints submitted by consumers to the CFPB, and coordinating with other federal and state agencies on military consumer protection measures.
The office has handled more than 90,000 consumer complaints from servicemembers and their families and taken action to help return hundreds of millions into the pockets of servicemembers affected by harmful practices.
If CFPB used its authority to proactively monitor institutions for MLA compliance, it would enhance quality of life for our servicemembers and increase the readiness of the armed forces. Each separation of a Service member is estimated to cost the Department $58,250, and the Department estimates that each year approximately 4,640 to 7,580 Service members are involuntarily separated where financial distress is a contributing factor. If the Department’s proposed regulation could reduce the annual number of involuntary separations where financial distress is a contributing factor from between 5 to 30 percent, the savings to the Department could be in the range of approximately $13.51 million to $132.52 million each year.