Under President Donald Trump, the Consumer Financial Protection Bureau has made numerous changes to its oversight of the lending industry but one move in particular baffled many.
In 2018, the CFPB decided it is no longer necessary to proactively ensure that banks and other lenders are not preying on America’s veterans and their families, numerous news outlets reported.
Instead, the bureau will only take action against a predatory lender if it receives an individual complaint, according to Vox.
The CFPB previously “conducted proactive checks that make sure lenders aren’t charging military members exorbitant interest rates, pushing them into forced arbitration, or otherwise not following guidelines outlined in the Military Lending Act, a 2006 law that protects active-duty military members and their families from financial fraud, predatory loans, and credit gouging.”
Why the change? The agency said such oversight was part of the “overly aggressive” practices put into place by the CFPB’s first director, Richard Cordray, and under Trump, the bureau seeks to scale back its activity.
But critics claimed at the time that the rule change was unnecessary and would simply put veterans and their families at higher risk of predatory lending practices.
“This is akin to removing your sentries from guard posts on military compounds. If you do that, you’ll have the expectation that the bad guys will try to penetrate your compound and will probably be successful,” said retired Army Col. Paul Kantwill, who left a position at the consumer protection agency in 2018. “That’s exactly what this type of action would result in.”
At the time of the rule change, former White House Chief of Staff Mick Mulvaney was the acting director of the CFPB. Mulvaney, who has since been replaced at the agency by Kathy Kraninger, has long opposed the mere existence of the CFPB and immediately attempted to scale back its reach.
The Military Lending Act, passed in 2006 with bipartisan support, sought to address the problem of predatory lenders disproportionately targeting members of the U.S. military. Such lenders often “convince borrowers to accept unfair terms to get a loan, lie to them or coerce them, or give loans out to people they know won’t be able to pay them back,” Vox noted.
Defense Department studies over the past decade have found that veterans are about four times more likely than other Americans to be targeted by these lenders. The Military Lending Act initially addressed a small portion of the risks predatory lenders posed to veterans, but by 2015, the law had more meat on its bones — including giving the CFPB supervisory responsibilities.
According to the agency, it has “delivered more than $130 million in relief to service members since 2011 and handled more than 71,000 consumer complaints from them and their families,” as well as taken enforcement actions against lenders found to have broken the law.
But all of that changed in 2018, when Mulvaney ushered in a new era where the CFPB’s supervisory role is all but eliminated.
Kraninger, the current CFPB director, told The Military Times in May 2019 that the agency’s examiners retain their ability to highlight concerns or violations of the Military Lending Act but maintained that the bureau has no explicit authority to oversee the issue as it previously did.
“If examiners see something related to the MLA, they absolutely cite it and make the company aware of it, and to the extent it needs to be taken to the next level, we have full enforcement authority when it comes [to] the MLA,” Kraninger said last year. “What we’re seeking is narrow, explicit authority to do exams particularly on the MLA, to actively go in and do a concerted MLA-related exam.”
Earlier this year, Rep. Maxine Waters (D-CA), Chairwoman of the House Committee on Financial Services, chastised Kraninger during a committee hearing for her general effort to rollback consumer financial protections.
“Director Kraninger, since your confirmation as Consumer Bureau Director, you have undertaken a series of actions that have undermined the Consumer Bureau’s mission to protect consumers from harmful financial practices and products,” Waters said in prepared remarks.
“You’ve also eased up on enforcement and supervisory activity, taking a see-no-evil approach to enforcing our nation’s consumer protection laws,” she added.
Waters introduced a bill in November of last year that would “require the CFPB to resume the Military Lending Act examinations, as one of a number of requirements for that bureau,” The Military Times noted. The bill passed out of committee last year but has yet to advance further.
In the meantime, rolling back CFPB’s proactive examinations is “literally going to be putting service members back in the crosshairs of predatory lenders,” Scott Astrada, the federal advocacy director at the consumer advocacy group the Center for Responsible Lending, told Vox.
Image credit: Official White House Photo by Shealah Craighead / Public Domain