Sinema Urges Protections for Military Families Against Predatory Lenders

Mar 25, 2019

Senator calls on federal consumer protection agency to resume compliance with Military Lending Act

WASHINGTON – Arizona senior Senator Kyrsten Sinema called on the Consumer Financial Protection Bureau to protect military servicemembers and their families from predatory lenders by resuming compliance under the Military Lending Act.
“Servicemembers and their families make incredible sacrifices to keep Arizonans safe—and, because of their service, are particularly vulnerable to predatory lending. It’s our duty to stand with Arizona’s military families and protect them from shady lenders who threaten their financial security,” said Sinema.
The Military Lending Act protects servicemembers and their families from certain financial practices such as predatory lending. Before November 2018, it was regular practice for the CFPB to include compliance with the Military Lending Act in the Bureau’s routine lender examinations. 
The letter highlights the importance of the Military Lending Act in servicemembers’ financial stability and military readiness by protecting servicemembers from separating due to personal financial issues caused by predatory lending. Losing a servicemember due to financial instability costs taxpayers and the Department of Defense $58,000 for each separated servicemember.
The full text of the letter is available below:
Dear Director Kraninger:
We write to request that you fulfill the Consumer Financial Protection Bureau’s (CFPB) mission by including compliance with the Military Lending Act (MLA) in the Bureau’s routine lender examinations, as was its practice prior to November 2018.  In short, we urge you to stand up to predatory lenders and stand with servicemembers and their families.
In 2006, Republicans and Democrats set aside partisanship and worked across the aisle to enact the MLA, which not only caps at 36% the annual interest rate for an extension of consumer credit to a servicemember or his or her dependents, but also strengthens military readiness by preventing unnecessary servicemember separations caused by predatory lending. According to DOD, losing a servicemember due to personal issues, such as financial instability, costs taxpayers and DOD more than $58,000 for each separated servicemember. 
Indeed, when the CFPB was making every effort to protect servicemembers and their families, its own routine examination of one payday lender uncovered a violation of the MLA, where loans at rates higher than 36% were being extended to more than 300 active-duty servicemembers or their dependents.  We urge you to continue these examinations in order to pursue the clear bipartisan goals of supporting military readiness, saving taxpayer money, and protecting our servicemembers and their families from predatory lenders. 
The CFPB’s existing statutory authorities are more than sufficient to justify including MLA compliance in routine examinations, and to our knowledge, the CFPB’s authority in this regard has never been challenged.
As explained by the Consumer Federation of America in its November 1, 2018, legal analysis – Missing in Action? Consumer Financial Protection Bureau Supervision and the Military Lending Act – the relevant statutory provisions give the CFPB more than one basis for including the MLA in CFPB examinations.
For instance, one such provision, Section 1024(b)(1)(C) of the Dodd-Frank Wall Street Reform and Consumer Protection Act, explicitly states that the CFPB “shall require reports and conduct examinations on a periodic basis…for purposes of…detecting and assessing risks to consumers and to markets for consumer financial products and services.”  Charging servicemembers and their families more than 36% interest for loans is clearly a risk to consumers and indeed, DOD has stated that “high-cost debt can detract from mission focus, reduce productivity, and require the attention of supervisors and commanders.”  Therefore, the CFPB is authorized under Section 1024(b)(1)(C) to conduct examinations for this purpose.
When Office of Management and Budget Director Mick Mulvaney removed MLA compliance from CFPB examinations, he argued that “such a broad statutory reading offers little to restrain the Bureau from supervising for compliance with a wide variety of other laws.”  To be clear, based on the plain text of Section 1024(b)(1)(C), Congress specifically intended this broad statutory reading.  In the aftermath of the worst financial crisis in decades where safety and soundness regulators failed to keep a watchful eye over Wall Street and predatory lenders, Congress provided the CFPB with broad powers to protect consumers – with an explicit focus on servicemembers and their families –  so that risks could be spotted before they caused irreparable harm.  In short, the CFPB continues to have all the authority it needs to include the MLA as part of its routine lender examinations. There is no law that prevents you from doing so.   
The CFPB should not have to be persuaded to stand up for consumers, especially military consumers and their families who simply do what’s right when asked to protect and defend our nation.  Unlike the current CFPB leadership, our servicemembers do not seek out loopholes to shirk their responsibilities.
We urge you to do your duty and carry out the CFPB’s mission by standing with servicemembers and their families and ensuring that they receive all of the MLA protections they have earned.  Please provide a full justification of your decision to put servicemembers at risk by failing to do your duty no later than Friday, March 8, 2019.