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The Trump administration is planning to suspend routine examinations of lenders for violations of the Military Lending Act, which was devised to protect military service members and their families from financial fraud, predatory loans and credit card gouging, according to internal agency documents.
Mick Mulvaney, the interim director of the Consumer Financial Protection Bureau, intends to scrap the use of so-called supervisory examinations of lenders, arguing that such proactive oversight is not explicitly laid out in the legislation, the main consumer measure protecting active-duty service members, according to a two-page draft of the change.
The agency’s supervisory exams have been critical in uncovering previous instances of wrongdoing and led to several of its biggest fines. In 2014, the bureau fined one of the largest payday lenders in the country, Ace Cash Express, $10 million after determining the company, based in Texas, steered low-income borrowers, including those in the military, into a succession of financially damaging high-interest loans.
Instead of conducting examinations that might find similar patterns, the bureau will now rely solely on complaints funneled through its website, hotlines, the military and people who believe they have been victims of abuse.
“It will go from a proactive system to something that is completely reactive,” said Christopher L. Peterson, a University of Utah law professor who served in a variety of top positions at the bureau from 2012 to 2016. “Over time, it is going to have a real impact on the lives of these people who devote their lives to the service of our country.”
But the banking and payday industries are likely to fight any such legislation and quick passage is anything but guaranteed. The industry has been lobbying to loosen enforcement for years, in part by trying to exempt an array of fees from the 36 percent rate cap.
“It’s basically about greed,” said Senator Jack Reed, Democrat of Rhode Island, who is a co-sponsor of the bill. “The industry has been pushing for this because they want to make more than 36 percent — I mean, who needs more than 36 percent to make a profit?”
Over the last decade, Department of Defense studies have found that military members, their families and veterans are four times as likely to be targeted by unscrupulous lenders. Money woes, the studies also found, are a significant source of morale problems among service members.
https://www.nytimes.com/2018/08/10/us/politics/mulvaney-military-lending.html
Mick Mulvaney, the interim director of the Consumer Financial Protection Bureau, intends to scrap the use of so-called supervisory examinations of lenders, arguing that such proactive oversight is not explicitly laid out in the legislation, the main consumer measure protecting active-duty service members, according to a two-page draft of the change.
The agency’s supervisory exams have been critical in uncovering previous instances of wrongdoing and led to several of its biggest fines. In 2014, the bureau fined one of the largest payday lenders in the country, Ace Cash Express, $10 million after determining the company, based in Texas, steered low-income borrowers, including those in the military, into a succession of financially damaging high-interest loans.
Instead of conducting examinations that might find similar patterns, the bureau will now rely solely on complaints funneled through its website, hotlines, the military and people who believe they have been victims of abuse.
“It will go from a proactive system to something that is completely reactive,” said Christopher L. Peterson, a University of Utah law professor who served in a variety of top positions at the bureau from 2012 to 2016. “Over time, it is going to have a real impact on the lives of these people who devote their lives to the service of our country.”
But the banking and payday industries are likely to fight any such legislation and quick passage is anything but guaranteed. The industry has been lobbying to loosen enforcement for years, in part by trying to exempt an array of fees from the 36 percent rate cap.
“It’s basically about greed,” said Senator Jack Reed, Democrat of Rhode Island, who is a co-sponsor of the bill. “The industry has been pushing for this because they want to make more than 36 percent — I mean, who needs more than 36 percent to make a profit?”
Over the last decade, Department of Defense studies have found that military members, their families and veterans are four times as likely to be targeted by unscrupulous lenders. Money woes, the studies also found, are a significant source of morale problems among service members.
https://www.nytimes.com/2018/08/10/us/politics/mulvaney-military-lending.html
