SACRAMENTO, Oct. 24, 2018 – Today, California Attorney General Xavier Becerra joined a bipartisan multistate coalition criticizing the Consumer Financial Protection Bureau (CFPB) under Acting Director Mick Mulvaney for its failure to protect military service members. In a multistate letter, the 33 attorneys general condemned CFPB Acting Director Mulvaney for the decision to strip the agency’s oversight of lenders under the Military Lending Act (MLA). This oversight is a vital component of safeguarding service members and their families from unscrupulous lenders and the burden of unaffordable debt. The MLA caps interest rates, bans arbitration, and limits finance charges for consumer loans to individuals in the military and their families. By eliminating oversight of lender compliance, the CFPB puts military service members and their families at risk.
“Military service members and their families have made exceptional sacrifices for the well-being and protection of our country. Yet the current leadership at the Consumer Financial Protection Bureau is reversing course and treating them disgracefully,” said Attorney General Becerra. “Rather than honor service members by protecting them from predatory lenders, CFPB Acting Director Mick Mulvaney has shamefully turned his back. Mulvaney’s directive for the CFPB to ignore the MLA and its legal obligation to oversee lenders isn’t just irresponsible, it is a whole new level of low.”
The MLA was originally passed into law in 2006 by a Republican-controlled Congress under the Bush Administration. In 2010, the Dodd-Frank Act established by statute an Office of Servicemember Affairs as part of the new CFPB, and in 2013, Congress extended enforcement of the MLA to the CFPB. Under the Obama Administration, the Department of Defense, in consultation with financial regulators, promulgated new regulations to close loopholes and modernize protections under the MLA.
The MLA protects service members and their immediate families against exploitative loans charging more than 36 percent interest, or loans containing other predatory features such as excessive finance charges and binding arbitration. The Defense Department has described the issue of maintaining the financial stability of its service members and their families as critical to sustaining an all-volunteer force.
The state attorneys general highlight in the letter a number of problems with Acting Director Mulvaney’s plan to pull back CFPB’s oversight of lender compliance with the MLA, contending that the agency:
- Failed to abide by its legally-mandated duty to enforce the MLA and punish lenders for unfair, deceptive, or abusive business practices;
- Overstepped its authority by interpreting the MLA without consulting the Defense Department. Under the law, the Department of Defense has authority to interpret the MLA, while the CFPB is obligated to enforce the law;
- Violated its own principles enacted by current Acting Director Mulvaney, expressing a commitment to decision-making based on cost-benefit analysis. The plan to stop supervising for compliance with the MLA imposes significant costs to service members without providing relief; and
- Contradicted the agency’s own intention to avoid regulation by enforcement, by all but ensuring that the CFPB will only address problems through enforcement.
Attorney General Becerra is committed to working on behalf of our military service members and veterans. Among other actions, he has filed criminal charges against a San Diego jewelry merchant for unlawful financing and debt collection practices targeting active-duty military families; he reached a multistate settlement with VietNow National Headquarters, Inc., a charity that falsely claimed to help veterans; and he sued two bogus charities, Wounded Warriors Support Group and Central Coast Equine Rescue and Retirement, for pocketi ng the proceeds of charity raffles that were supposed to benefit veterans. In September 2018, Attorney General Becerra sponsored a new law to strengthen California’s existing consumer protections for service members and military families, including California National Guard soldiers and airmen. The Attorney General’s Office has also provided training on military consumer protection to prosecutors and JAG legal assistance attorneys throughout the state and publishes consumer protection flyers for service members and veterans.