(AP Photo/Andres Kudacki)
The Consumer Financial Protection Bureau and Department of Defense are illegally withholding documents on why CFPB refuses to ensure that financial institutions are protecting servicemembers from predatory lenders as required by the Military Lending Act. The MLA, enacted in 2006 in response to a predatory lending crisis affecting servicemembers throughout the country, is a critical law that provides needed protection for military families from unethical, unsavory, and predatory financial practices. By suspending examinations, the CFPB has put servicemembers at serious risk of being victimized by these predatory practices.
The public deserves to know how CFPB made this decision, especially since it was based on CFPB’s erroneous conclusion that it lacks the legal authority to proactively ensure that lenders comply with the MLA. Our lawsuit follows Director Kathy Kraninger’s transmittal of legislative language seeking “clarifying authority” from Congress. Kraninger’s position conflicts with the law, which already provides the CFPB the legal authority to ensure that financial institutions are complying with their obligations under the MLA.
CFPB’s decision to stop exercising its MLA supervisory authority favors industry groups, including the auto dealership industry, which lobbied to reduce protections for military families when taking out car loans, and members of the Consumer Bankers Association, which requested changes to the MLA, at the expense of servicemembers and their families.
CFPB is authorized to conduct supervisory examinations for the purpose (among others) of “detecting and assessing risks to consumers and to markets for consumer financial products and services.” The MLA reflects Congress’s conclusion that exorbitant interest rates and predatory lending practices present a serious risk to servicemembers, and thus there can be no question that CFPB is authorized to conduct examinations to ensure that the financial institutions under its jurisdiction are complying with the terms of the Act. CFPB’s apparent conclusion to the contrary is plainly inconsistent with the law and with the intent of Congress.
CFPB’s decision is also at odds with the position of the Department of Defense. In October 2018, a DOD Acting Assistant Secretary wrote in a letter to Members of Congress that predatory lending practices “continue to pose risks to the financial readiness of Service members and families” and that “[a]bsent continued monitoring and enforcement of MLA compliance, the Department and the prudential regulators may be unable to identify or respond timely to trends or early warning signs of harmful practices.” Yet, reports indicate that DOD was never consulted regarding CFPB’s intent to suspend MLA supervision.
A bipartisan array of members of Congress has made clear that CFPB is authorized to conduct MLA supervision. And in October 2018, a bipartisan group of thirty-three state attorneys general weighed in to agree that the MLA already authorizes CFPB supervision to protect servicemembers.
We filed a lawsuit to force CFPB and DOD to reveal how CFPB made this unlawful decision. The Trump Administration is abdicating its legal and moral duty to protect military families from exploitation by predatory lenders. We’re investigating how and why the administration is prioritizing loan profiteers over America’s servicemembers and their families. This lawsuit follows FOIA requests in September, October, and December, 2018.
We expect the government to reply to our lawsuit by March 4, 2019.