Washington, DC—(ENEWSPF)—August 17, 2018
By: Rosemary Piser
Following reports that the Trump Administration is planning to end critical protections for servicemembers and military families from predatory loans, financial fraud and credit gouging, U.S. Senators Tammy Duckworth (D-IL) and Dick Durbin (D-IL) joined Senator Jack Reed (D-RI), the Ranking Member of the Armed Services Committee, and every Democratic member of the U.S. Senate in urging the Trump Administration to reverse course. The Trump Administration is reportedly planning to stop proactively policing financial lenders to ensure they are not violating the Military Lending Act, which provides critical protections for servicemembers and their families from predatory loans, financial fraud and exorbitant interest rates. Under the proposed change, the administration would instead only take action if they receive a complaint that a servicemember or military family has been ripped off.
In a letter to Consumer Financial Protection Bureau (CFPB) Acting Director Mick Mulvaney, the Senators wrote:
“The CFPB should not be abandoning its duty to protect our servicemembers and their families, especially those who are deployed overseas facing hostile fire. It is unreasonable to place the burden of detecting and reporting [financial] 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.”
The CFPB’s Office of Servicemember Affairs’ proactive enforcement of these financial protections has helped put $130 million back into the pockets of servicemembers, their families and Veterans who were targeted by predatory lenders. Instead of increasing the CFPB’s ability to protect servicemembers and their families, the administration is reportedly planning to undermine its ability to take proactive action.
The Senators emphasized how misguided this policy change would be since servicemembers are disproportionately targeted by financial scams and are especially vulnerable to financial fraud during deployments. The Senators noted that financial instability harms military readiness, causing a loss of mission capability. NPR also reported this week that the Trump White House is also planning to abandon a policy that prevents servicemembers from getting ripped off when they buy cars at the behest of the car industry.
In addition to Senators Duckworth and Durbin, the letter was signed by the Ranking Member of the Banking, Housing, and Urban Affairs Committee Sherrod Brown (D-OH), the Ranking Member of the Commerce Committee Bill Nelson (D-FL), the Ranking Member of the Veterans’ Affairs Committee Jon Tester (D-MT), Senator Joe Donnelly (D-IN), U.S. Senate Minority Leader Charles E. Schumer (D-NY) and every Senate Democrat.
The text of the letter is below:
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.