The Consumer Financial Protection Bureau issued an interpretive rule laying out its plans to resume examinations for conduct violating the Military Lending Act.
The agency had previously discontinued exams for MLA violations in 2018 under Mick Mulvaney, citing a belief that the bureau had not been explicitly granted authority to do so. Current CFPB leadership “does not find those prior beliefs persuasive,” the agency said.
Resuming MLA exams “affirms the CFPB’s ongoing commitment to the financial protection of our servicemembers and their families,” said Jim Rice, assistant director for the CFPB’s Office of Servicemember Affairs.
Mulvaney said that “proactive oversight is not explicitly laid out in the legislation” for the bureau to oversee financial firms for MLA compliance; the bureau continued to respond to consumer complaints, however, during the pause. Former CFPB Director Kathy Kraninger requested explicit authorization in 2019.
First enacted in 2006, the MLA was designed to protect military service members and their families from financial fraud, predatory loans and credit card gouging. Initially applied to a narrow range of loans, MLA was expanded in 2015 to cover a greater variety of loans, all subject to a 36 percent annual percentage interest rate cap for active-duty military members and their dependents.
Studies have found that military members, their families and veterans are four times as likely to be targeted by dishonest lenders. Since it began monitoring financial institutions for MLA violations in September 2013, the CFPB has returned more than $130 million to service members, veterans and their families.
Under Kraninger, the CFPB initiated a series of enforcement actions for MLA violations in 2020 as part of an ongoing effort. In January, current CFPB Acting Director Dave Uejio vowed to return to proactive MLA supervision as part of his priorities for the agency.
“The Military Lending Act is an essential law protecting the finances of our military families and we are excited to announce this rule change prior to July, which is Military Consumer Month,” Uejio said in a statement. “Through our enforcement of the MLA, companies that harmed military borrowers have been ordered to pay millions of dollars in redress and civil penalties. To fulfill its purpose and protect military borrowers we must supervise financial institutions and hold them accountable for endangering consumers.”