CFPB to Resume Military Lending Act Enforcement

Reversing a Trump Administration policy, the Consumer Financial Protection Bureau announced Wednesday that it will immediately resume enforcement and supervisory activities under the Military Lending Act.

“Through our enforcement of the MLA, companies that harmed military borrowers have been ordered to pay millions of dollars in redress and civil penalties,” Acting CFPB Director Dave Uejio said, in announcing the policy change. “To fulfill its purpose and protect military borrowers we must supervise financial institutions and hold them accountable for endangering consumers.”

The MLA is intended to protect active-duty military members and their families from predatory lenders. In general, it sets a 36% interest rate cap for loans to those individuals.

In 2013, the CFPB amended its supervisory procedures to allow examiners to review lender records regarding MLA violations. From that time until 2018, no company questioned the agency’s authority to enforce that law. However, in 2018 Trump Administration officials declared that they believed the law did not allow CFPB enforcement of the MLA.

Senate Democrats were outraged and all of them sent a letter to then-Acting CFPB Director Mick Mulvaney urging him to abandon that position. But Mulvaney and eventual CFPB Director Kathleen Kraninger argued that federal law did not give the agency that power.

CFPB officials said Wednesday that was an incorrect interpretation of the law.

“The current CFPB leadership does not find those prior beliefs persuasive and the CFPB will now resume MLA-related examination activities,” the agency said Wednesday. The agency in its announcement added, “the Bureau is now returning to the original position that it took from 2013 until 2018.”

The bureau said that since the rule issued Wednesday amounts to an “interpretive rule,” the agency may immediately adopt it without being required to solicit public comment.

CFPB officials conceded that some of their activities may overlap those of the prudential regulators, such as the National Credit Union Administration. They added, “The agencies work with each other to minimize regulatory burden that may result from their complementary authorities, while ensuring the efficient and effective protection of covered borrowers.”

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