Mulvaney urged not to weaken military consumer protection
Nearly 30 military associations and veterans groups on Thursday sent a joint letter to Mick Mulvaney, acting director of the Consumer Financial Protection Bureau, urging him not to weaken the CFPB’s application of the 2006 law on military loans to make military consumers more vulnerable to predatory or deceptive lenders. .
The letter was also addressed to Secretary of Defense James Mattis because his department drafted the Loan Protection Regulations to implement the Loan Act.
“We urge you to stand with the troops and against any attempt to weaken the military loan law, including the Bureau’s supervisory and enforcement authority and the Department’s rules against abusive lending by all. businesses, including auto dealers, ”the advocacy groups wrote.
A week earlier, Senate Democrats sent their own joint letter to Mulvaney, pleading that he does not ask the Bureau to reduce its audit responsibilities and “make it easier for unscrupulous lenders” to target the military and their families.
A two-page internal document at the CRPB, reported last week by the New York Times, this shows Mulvaney, who is also director of the Bureau of Management and Budget, considering a policy change so that the Bureau’s auditors ignore the Military Loans Act when performing routine supervisory reviews of banks, savings and loans, payday lenders and other loan originators and brokers.
Kelly Hruska of the National Association of Military Families, one of nearly three dozen advocacy groups opposing the move, “said we fought hard for the Military Loans Act” and that we appreciated the way in which the CFPB since its inception has been “proactive in the application” of the law. “We don’t want this to go back.”
“I am deeply disturbed that the Office to Protect Consumers, including Service Members, is apparently considering making a political decision to no longer include compliance with the Military Loan Act regulations in its reviews of surveillance, ”said Christopher Peterson, one of the foremost experts in consumer law.
Peterson is also a senior researcher at the Consumer Federation of America (CFA), and served for years as special advisor to the former CFPB director, where he helped defense officials revise regulations on the military loan protection in 2015 to fill loopholes predatory lenders found and used in rules of origin.
“In practice,” Peterson said, the policy change Mulvaney envisioned would be “turning its back on our service members at a time when Washington executives should focus on complying with the new regulations by the industry.” . protect military consumers.
President Trump appointed Mulvaney as interim director last year. The senior executives he hired are said to have decided that neither the Dodd-Frank Act, which established the CFPB in 2010, nor the Military Loans Act as amended in 2013, grant specific authority to verify compliance with lending institutions by law on military loans.
The idea that Bureau auditors, “in fact, are supposed to put blinders on and ignore the violations of the Military Loans Act that they encounter is very ineffective and a bizarre political response,” Peterson said. “It is also not required by law, in my opinion. Congress gave the CFPB the power to conduct reviews to monitor risks to consumers. One of the risks would be that the military would be denied their legal rights under the Military Loans Act. “
Peterson said no recent court decisions or Justice Department opinions have emerged to justify relaxing the Bureau’s enforcement practices. If Mulvaney makes the switch, said Peterson, “it will be a political decision. It will not be a court decision. “
We asked the Bureau on Wednesday about the status of this proposal which has sparked outrage among military consumer advocates, and whether the policy change would in fact leave members of the service more exposed to predatory lenders.
“Under new leadership,” replied CFPB spokesperson John Czwartacki, “the Bureau has embarked on a comprehensive review of its activities and assesses whether these activities are in accordance with its statutory authority. [The Military Lending Act] is one authority among many that the Bureau has examined. The Bureau hopes to convey its findings to Congress and seek legislative clarity where appropriate. “
Until a month ago, Paul Kantwill was the Deputy Bureau Director in charge of his Office of Service Membership Affairs, which partners with the Department of Defense to educate military consumers, handle product complaints. and financial services and help enforce consumer protection at the national and federal levels. measures.
The proposal to end military loan law compliance checks surfaced after Kantwill left to become a senior research fellow at Loyola University Chicago School of Law. He said he opposed the move.
“It doesn’t make much sense to many of us that this activity cease,” said Kantwill, a retired military lawyer who then headed the Office of Legal Policy for the Under Secretary of Defense on staff. and preparation and was responsible for drafting the regulations to be implemented. the law on military loans.
The CFPB “has been very effective” in maintaining the “financial readiness” of military personnel, Kantwill said. “It seems to be a very dangerous precedent to go back on these policies and procedures” to protect military consumers.
Before the Military Loans Act came into effect, payday lenders were ubiquitous outside of military bases. Many members of the service looking for quick cash got stuck in short-term loans with interest rates of 300, 400, or even 500 percent.
The 2006 law imposed a 36% cap on the rates that lenders can charge military personnel and families on active duty. He ordered the Defense Ministry to issue regulations identifying the types of loans affected. The rules of origin covered payday loans, vehicle title loans and tax refund anticipation loans. The law also provided other protections. For example, it banned the inclusion of arbitration agreements in loans designed to deny military borrowers the right to sue for deceptive practices.
The law has served to stamp out major abuses involving particular credit products. But soon, lenders changed their practices to circumvent them. For example, the rate cap only applied to payday loans of 91 days or less, so lenders turned to offering longer-term loans. It covered vehicle title loans of $ 2,000 or less and 181 days or less, so lenders offered larger loans of longer terms to avoid the cap.
The 2013 Defense Authorization Act gave the CFPB the power to enforce the law on military loans. He also asked defense officials to lead an interagency task force to find ways to strengthen loan protection regulations and expand the number of products covered. The new rules, which the lending industry strongly opposes, came into effect four months before Trump became president.
Peterson said he would not speculate on why the CFPB under Mulvaney is considering weakening its oversight of the Military Loans Act.
“What I’m prepared to say is that this would effectively protect payday lenders from possible legal liabilities and from public relations issues,” said Peterson, a professor at the Law School of the United Kingdom. ‘University of Utah.
Mulvaney also wants to restrict public access to complaints consumers can file against businesses. Millions of complaints are now accessible on the CFPB website, with the companies named but not the consumers filing the complaints.
Mulvaney “said he wanted to keep these complaints confidential so the public couldn’t see them,” Peterson said.
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