Defenders renew efforts to protect troops from predatory lenders
Advocates for six military and veterans organizations have renewed their pressure for a federal consumer agency to resume oversight of lenders to protect military personnel and their families from predatory practices.
Military and veteran groups are concerned about what amounts to “removing the sentries from the watchtower,” Mike Saunders, director of military and consumer policy for the nonprofit Veterans Education Success, told a news conference held in Washington.
For years, the Consumer Financial Protection Bureau had conducted supervisory reviews of payday lenders and others under their jurisdiction to verify their compliance with the Military Loans Act. Among other things, the law limits interest charges to 36% of the annual percentage rate on most consumer loans to military personnel and their dependents. But last year, CFPB stopped these exams, saying they lacked clear authority to do them.
“We need to get back to proactively making sure predators comply with the military loan law,” said Jen Davis, deputy director of government relations for the National Military Family Association. “We call on the federal government to address this issue on behalf of military families across the country. Veterans of Foreign Wars, the American Legion, the Association of Military Officers of America, and veterans of Iraq and Afghanistan were also represented.
In January, officials from The CFPB asked for a law to clarify and provide specific authority.
The Military Lending Act of 2006, and the DoD regulations that implement this law, limit the maximum annual percentage rate to 36% on most consumer loans to active-duty military personnel and their dependents, including administration fees and certain other costs in the calculation. Typically, the APR for most loans would be below 36%, but loans with even higher interest rates, sometimes over 300%, are still available to all other members of the civilian community. Before the passage of the 2006 law, the military were the targets of these predatory lenders.
“We keep asking ourselves why, if the CFPB has the power to monitor compliance with other federal consumer finance laws, why should it not have the power to monitor compliance with the Military Loans Act? Davis said.
Advocates did not clarify their position on the need for legislation, noting that they believed the CFPB already had the authority. But they noted that the federal government must do whatever it takes to get to the end state to be proactive.
For months, advocates have expressed fear that removing this supervisory authority, in fact offering less oversight of these lenders, means less deterrence in the market. A number of groups mounted a $ 250,000 advertising campaign last year to raise awareness of this issue. Advocates, military commanders and others generally agree that the Military Loan Act has had the desired effect of reducing the use of payday lenders.
Those groups said on Wednesday they had seen no evidence of a return to predatory lending practices targeting the military, but wanted the CFPB to resume its examinations to avoid any potential problems.
A bill, introduced by Rep. Maxine Waters, D-Calif., And passed by the House Financial Services Committee, would require the CFPB to resume Military Lending Act reviews, as one of the office’s many requirements.
In an interview with Military Times in January, CFPB Director Kathleen Kraninger said CFPB examiners always have the opportunity to highlight concerns or violations of the Military Loan Act as they conduct reviews. compliance with other federal laws.
“If the reviewers see anything related to MLA, they absolutely cite it and let the company know, and as long as it needs to be taken to the next level, we have full enforcement authority when it comes to MLA. “said Kraninger. .
“What we are looking for is a narrow and explicit authority to take exams especially on the MLA, to actively participate and do a concerted MLA-related exam,” she said.
However, when asked on Wednesday whether examiners found alleged violations of the Military Loans Act in their reviews related to other laws and whether any action had been taken, the CFPB did not provide a response. .
In an email response, the CFPB said, “Director Kraninger is committed to protecting the U.S. military and, to that end, she introduced a bill to Congress earlier this year that would grant the office power. explicit evaluation of supervised institutions for their compliance with the MLA.
“Director Kraninger will continue to work with Congress to advocate for the passage of this legislation. The Office will continue to protect the military through enforcement and coordination with other agencies, as well as to focus on education efforts that enable military personnel to make informed financial decisions. “
With the removal of CFPB’s supervisory reviews of payday lenders, “any effort to detect fraud now rests on the shoulders of military personnel and families,” said Davis of the National Military Family Association.
That means understanding their protections under the Military Loans Act when working with creditors, knowing who the enforcement agency is and where to file complaints, she said.
Capitol Hill Bureau Chief Leo Shane III contributed to this report.