3/05/2019 — 

WASHINGTON, DC – After President Trump’s handpicked appointee to the Consumer Financial Protection Bureau (CFPB) signaled the watchdog agency will no longer use its authority and tools to actively protect U.S. military personnel and their families from predatory lenders and ensure compliance with the Military Lending Act (MLA), the entire Senate Democratic Caucus sent a letter urging CFPB not to retreat from using all of its authorities to include the Military Lending Act in the Bureau’s routine lender examinations.

The letter, led by U.S. Senator Jack Reed (D-RI), the Ranking Member of the Armed Services Committee; U.S. Senator Sherrod Brown, Ranking Member of the Banking, Housing, and Urban Affairs Committee; U.S. Senator Jon Tester (D-MT), Ranking Member of the Veterans' Affairs Committee; and Minority Leader Chuck Schumer (D-NY); and signed by the entire Caucus notes that the Trump Administration’s actions are undermining financial protections for military families.

“We urge you to stand up to predatory lenders and stand with servicemembers and their families,” the 47 Senators wrote to Director Kraniger. 

“We urge you to do your duty and carry out the CFPB’s mission by standing with servicemembers and their families and ensuring that they receive all of the MLA protections they have earned.  Please provide a full justification of the current CFPB leadership’s decision to put servicemembers at risk by failing to do its duty no later than Friday, March 8, 2019,” the Senators continued.  

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%.  It also strengthens military readiness by helping to preventing unnecessary servicemember separations caused by predatory lending.  According to DOD, losing a servicemember due to personal issues, such as financial instability, costs taxpayers and DOD more than $58,000 for each separated servicemember.

But Trump-appointed CFPB officials are seeking to roll back consumer protections for U.S. troops by halting the examination of financial firms for compliance with the Military Lending Act.  At the behest of Trump appointees, the CFPB discontinued the supervision of regulated entities for compliance with the MLA.

In their letter, the Senators note: “Indeed, when the CFPB was making every effort to protect servicemembers and their families, its own routine examination of one payday lender uncovered a violation of the MLA, where loans at rates higher than 36% were being extended to more than 300 active-duty servicemembers or their dependents.  We urge you to continue these examinations in order to pursue the clear bipartisan goals of supporting military readiness, saving taxpayer money, and protecting our servicemembers and their families from predatory lenders. 

“The CFPB’s existing statutory authorities are more than sufficient to justify including MLA compliance in routine examinations, and to our knowledge, the CFPB’s authority in this regard has never been challenged.

“As explained by the Consumer Federation of America in its November 1, 2018, legal analysis - Missing in Action? Consumer Financial Protection Bureau Supervision and the Military Lending Act - the relevant statutory provisions give the CFPB more than one basis for including the MLA in CFPB examinations.”

The Senators call on the Trump Administration to stop siding with payday lenders and ensure that military families are not saddled with unfair, unnecessary debt.

Full text of the letter follows (PDF attached):

March 5, 2019

Hon. Kathleen Kraninger
Director
Consumer Financial Protection Bureau
1700 G St. N.W.
Washington, D.C. 20552

Dear Director Kraninger:

We write to request that you fulfill the Consumer Financial Protection Bureau’s (CFPB) mission by including compliance with the Military Lending Act (MLA) in the Bureau’s routine lender examinations, as was its practice prior to November 2018.  In short, we urge you to stand up to predatory lenders and stand with servicemembers and their families.

In 2006, Republicans and Democrats set aside partisanship and worked across the aisle to enact the MLA, which not only caps at 36% the annual interest rate for an extension of consumer credit to a servicemember or his or her dependents, but also strengthens military readiness by preventing unnecessary servicemember separations caused by predatory lending.  According to DOD, losing a servicemember due to personal issues, such as financial instability, costs taxpayers and DOD more than $58,000 for each separated servicemember. 

Indeed, when the CFPB was making every effort to protect servicemembers and their families, its own routine examination of one payday lender uncovered a violation of the MLA, where loans at rates higher than 36% were being extended to more than 300 active-duty servicemembers or their dependents.  We urge you to continue these examinations in order to pursue the clear bipartisan goals of supporting military readiness, saving taxpayer money, and protecting our servicemembers and their families from predatory lenders. 

The CFPB’s existing statutory authorities are more than sufficient to justify including MLA compliance in routine examinations, and to our knowledge, the CFPB’s authority in this regard has never been challenged.

As explained by the Consumer Federation of America in its November 1, 2018 legal analysis - Missing in Action? Consumer Financial Protection Bureau Supervision and the Military Lending Act - the relevant statutory provisions give the CFPB more than one basis for including the MLA in CFPB examinations. 

For instance, one such provision, Section 1024(b)(1)(C) of the Dodd-Frank Wall Street Reform and Consumer Protection Act, explicitly states that the CFPB “shall require reports and conduct examinations on a periodic basis…for purposes of…detecting and assessing risks to consumers and to markets for consumer financial products and services.”  Charging servicemembers and their families more than 36% interest for loans is clearly a risk to consumers and indeed, DOD has stated that “high-cost debt can detract from mission focus, reduce productivity, and require the attention of supervisors and commanders.”  Therefore, the CFPB is authorized under Section 1024(b)(1)(C) to conduct examinations for this purpose. 

When Office of Management and Budget Director Mick Mulvaney removed MLA compliance from CFPB examinations, he argued that “such a broad statutory reading offers little to restrain the Bureau from supervising for compliance with a wide variety of other laws.”  To be clear, based on the plain text of Section 1024(b)(1)(C), Congress specifically intended this broad statutory reading.  In the aftermath of the worst financial crisis in decades where safety and soundness regulators failed to keep a watchful eye over Wall Street and predatory lenders, Congress provided the CFPB with broad powers to protect consumers – with an explicit focus on servicemembers and their families – so that risks could be spotted before they caused irreparable harm.  In short, the CFPB continues to have all the authority it needs to include the MLA as part of its routine lender examinations.  There is no law that prevents you from doing so.  

The CFPB should not have to be persuaded to stand up for consumers, especially military consumers and their families who simply do what’s right when asked to protect and defend our nation.  We urge you to do your duty and carry out the CFPB’s mission by standing with servicemembers and their families and ensuring that they receive all of the MLA protections they have earned.  Please provide a full justification of the current CFPB leadership’s decision to put servicemembers at risk by failing to do its duty no later than Friday, March 8, 2019.

Sincerely,