Shaheen & Hassan Demand Trump Admin Uphold its Duty to Shield U.S. Troops from Predatory Lending & Financial Fraud

August 16, 2018

**Recent Reports Indicate the Trump Administration is Planning to Undermine Key Aspects of the Military Lending Act & Make it Easier for Unscrupulous Lenders to Target U.S. Troops & Rip Off Military Families** 

(Washington, DC) – In an effort to protect soldiers and their families from abusive financial practices, U.S. Senators Jeanne Shaheen (D-NH) and Maggie Hassan (D-NH) are urging the Trump Administration not to abandon its duty to protect our servicemembers and their families under the Military Lending Act (MLA), along with every Democratic member of the U.S. Senate. 

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%. 

This week, the New York Times reported that: “The Trump administration is planning to suspend routine examinations of lenders for violations of the Military Lending Act, which was devised to protect military service members and their families from financial fraud, predatory loans and credit card gouging, according to internal agency documents. Mick Mulvaney, the interim director of the Consumer Financial Protection Bureau, intends to scrap the use of so-called supervisory examinations of lenders, arguing that such proactive oversight is not explicitly laid out in the legislation, the main consumer measure protecting active-duty service members, according to a two-page draft of the change.”

And NPR reports that the Trump administration is also taking aim at financial protections for members of the military by proposing to ease restrictions on “gap insurance” that could open up servicemembers to getting cheated by predatory practices when they purchase cars.

Recognizing that U.S. troops face unique financial challenges and that the financial readiness of our servicemembers is directly tied to military readiness, the Senators called on Mr. Mulvaney not to halt military lending checks or undertake measures that would potentially harm U.S. troops and their families, writing: “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.”

The 49 Senators noted that the U.S. Department of Defense has attested to the fact that the MLA helps save U.S. taxpayer funds and that needlessly stopping proactive MLA examinations would be both inefficient and irresponsible.

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,” wrote the Senators. “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.”

Congress created 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

The text of the letter is below.

August 15, 2018

Mick Mulvaney 
Director 
Office of Management and Budget 
725 17th Street, NW 
Washington, DC 20503

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.

Sincerely,