In a move that has surprised military families, the Consumer Financial Protection Bureau (CFPB) is planning to suspend routine examinations of lenders for violations of the Military Lending Act, which was designed to protect military service members and their families from financial fraud, predatory loans and credit card gouging.
Over the last decade, studies have found that military members, their families and veterans are four times as likely to be targeted by dishonest lenders. Since 2011, the CFPB has returned more than $130 million to service members, veterans and their families.
But according to The New York Times, Mick Mulvaney, the interim director of the CFPB, intends to stop the supervisory examinations of lenders, even though it is seen as the most powerful tool for uncovering abuses and patterns of illegal practices.
The proposal is a surprise — not only because military families have asked the government to come down harder on unscrupulous lenders, but also because lenders are not currently challenging the legislation’s oversight based on the law.
The CFPB will still bring individual cases against lenders who charge more than the annual interest rate cap of 36 percent mandated under the law, and continue to supervise lenders under other statutes.
“It will go from a proactive system to something that is completely reactive,” said Christopher L. Peterson, a University of Utah law professor who served in a variety of top positions at the bureau from 2012 to 2016. “Over time, it is going to have a real impact on the lives of these people who devote their lives to the service of our country.”
For its part, the lending industry has been lobbying to loosen enforcement for years, specifically trying to exempt an array of fees from the 36 percent rate cap.
“It’s basically about greed,” said Senator Jack Reed, Democrat of Rhode Island, who is a co-sponsor of the bill. “The industry has been pushing for this because they want to make more than 36 percent — I mean, who needs more than 36 percent to make a profit?”