Charlene CrowellColumnistsFinancial Literacy

CFPB Neglects Duty to Enforce Military Lending Act

Although predatory lending often conjures up images of an economically blighted Urban America, seldom does the image of an enlisted man or woman come to mind. But just as check cashing stores, along payday and auto title loan shops focus on communities of color, America’s military is also a frequent target.

For years and near military installations across the country, a profusion of predatory lenders plied their wares, capturing our service men and women into the same web of debt trap loans that ensnared Black and Latino civilians.

By 2006, a Defense Department report that delved into predatory lending practices against the nation’s armed services shared how the financial stress wrought affected military readiness. The report shared how predatory lending resulted in multiple negative effects. From “undermining troop readiness” and morale, to even the revocation of security clearances essential to military operations. 

In part the report stated, “Most of the predatory business models take advantage of borrower’s inability to pay the loan in full when due and encourage extensions through refinancing and loan flipping. These refinances often include additional high fees and little or no payment of principal.”

In reaction, to the Defense Department report, Congress enacted with bipartisan support the Military Lending Act (MLA). Drawing from the report’s recommendations, new military protections assured: a 36 percent interest cap for all costs associated with lending; included both military members and their families; and banned extensions of payday and auto title loans, or other types of predatory credit.

By 2010, the enactment of the Dodd-Frank Wall Street Reform and Consumer Protection Act, the newly created Consumer Financial Protection Bureau (CFPB) gave the nation for the first time a full-time consumer cop on the block, dedicated to financial fairness over a wide range of services and products. In 2012, the National Defense Authorization Act authorized the CFPB to enforce the MLA. That legislative move enabled CFPB to use its authority to protect service members.

Soon thereafter, veterans, military members, and their families took more than 72,000 lending complaints to the direct attention of the CFPB. Under the leadership of the Bureau’s first director, CFPB returned more than $130 million to the military community.

For several years, the CFPB conducted proactive supervision to verify that financial companies were honoring their obligations under the MLA — to not rip off our troops. Furthermore, the MLA itself was strengthened by Defense Department policy, which closed loopholes that lenders had been exploiting to rip off our service members.

Despite this multi-year drumbeat of consumer concern at the federal level, this year the current Acting Director of the CFPB recoiled from Dodd-Frank’s statutory duty to veterans. Instead of continuing its inclusion of MLA in CFPB supervisory examinations, earlier this year Mick Mulvaney, CFPB’s acting director, claimed that the agency has no such legal authority.

In reaction, a bipartisan contingent of 33 state attorneys general directly expressed their concerns regarding CFPB’s abdication of duty to the armed services. Representing coast-to-coast diversity in geography as well as economies were attorneys general who wrote on behalf of consumers from New England’s Vermont, to the mid-Atlantic’s North Carolina, the Midwest heartland of Illinois and Ohio, the Deep South’s Mississippi, westward to Colorado’s Rocky Mountain, and the most populous state, California.

“[W]e are perplexed by reports indicating that the CFPB has determined that it needs further statutory authority in order to conduct examinations for MLA violations,” the attorneys general wrote. “We are also disappointed to learn that CFPB did not consult the Defense Department in developing its new examination policy, even though Congress specified that the Defense Department — not the CFPB — is the primary federal agency responsible for interpreting the MLA.”

“By eliminating the proactive examination of compliance to correct problems before they affect service members, however, your proposal will limit the CFPB’s protection of service members to reactive enforcement when service members submit complaints,” the attorneys general wrote.

Nor were governmental officials the only ones to speak up in defense of the MLA.

The Consumer Federation of America (CFA), an association of nonprofit interests that together have used a combination of education, research and advocacy to protect consumers since 1968, released a report that challenges CFPB to “Protect Those Who Protect America.” Written by Christopher L. Peterson, CFA’s Director of Financial Services, it rejects Mulvaney’s interpretation, and itemizes specific directives and requirements that together pose a legal argument that would be difficult to deny or disprove.

“For some inexplicable reason, the Trump administration is directing the CFPB to overlook illegal, usurious lending to our troops within supervisory exams,” said Peterson. “America’s military families deserve the protection from predatory lending offered by the Military Landing Act – not to be abandoned by the CFPB.”

Veterans are also expressing their own heartfelt concerns about the unexpected reversal of consumer protection.

In a recent blog, Melissa Bryant, a member of the Iraq and Afghanistan Veterans, also spoke up.

“We know that service members are four times more likely to be targeted by predatory lenders and are in desperate need of stringent oversight and protection measures from fraud,” Bryant said. “If you need further proof, just look down the main drag of any street leading into a military post, full of payday lenders and car dealerships who prey upon young troops with little or no credit, but a steady paycheck to spend.”

And in a recent town hall convened by CFPB in Baton Rouge, a commander with the state’s branch of the American Legion faced off with Mulvaney.

Speaking on behalf of veterans, Ricky Griffin told the acting director, “Both the Pentagon and the American Legion are extremely worried about your proposal to pull back on enforcing the Military Lending Act. . . With the military currently unable to make its recruitment numbers this year, I think it is wrong for your agents to back off of any enforcement of the Military Lending Act…Why single out military service members?”

Mr. Griffin and all of America’s military deserves an answer.

Charlene Crowell is the Center for Responsible Lending’s communications deputy director. She can be reached at

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