Earlier this month, the apparent next chair of the U.S. House Committee on Financial Services, along with almost two dozen other Democrats, urged the Consumer Financial Protection Bureau’s new director to proactively supervise firms for compliance with servicemember lending rules. 

In a letter to CPFB Director Kathleen Kraninger, Rep. Maxine Waters (D-Calif.) and twenty-two of her colleagues on the Committee stated that legal authorities and a bipartisan group of lawmakers agree that there is “no question” that the CFPB has the authority and obligation to supervise lenders for violating the Military Lending Act, or “MLA.”  The letter, as a result, requested that Kraninger formally commit to “resuming a consistent supervisory role over consumer protection laws, including the MLA, for the most robust and efficient protection of servicemembers and their families.”  It further warned that members of the military continue to be targets for “unscrupulous actors” and cited statistics showing that the agency handled 47% more servicemember complaints in 2017 than it did in 2016.

Over the summer, The New York Times reported that former CFPB acting director Mick Mulvaney planned to halt the agency’s use of supervisory examinations to check for lenders’ compliance with the MLA.  The MLA places a 36% interest rate cap on loans to military borrowers, bans mandatory arbitration clauses, and restricts other lender practices and loan terms.  Under that new planned policy, the agency would not proactively search for MLA violations on a routine basis, although it would accept and pursue cases against lenders upon receiving complaints.  This move resulted from a determination that the CFPB lacked explicit statutory authority to incorporate MLA compliance checks into its examinations.

The letter from House Democrats rides on the coattails of servicemember groups, consumer advocates, and others who swiftly opposed the change, arguing that dropping the compliance checks could expose active-duty troops and their families to harm from predatory lenders and, in the process, jeopardize military readiness.  Even the U.S. Department of Defense stated that the CFPB failed to consult with it about this change in policy.

As the likely next chair of the House Financial Services Committee, Waters underscored, through her criticism of Mulvaney and his policies, the pledges she has made to prioritize consumer protection during her new term in office.  In a statement, Waters asserted, “Of particular importance is ensuring that the [CFPB] is not dismantled by Trump’s appointees.  This critical agency must be allowed to resume its work of protecting consumers from unfair, deceptive or abusive practices without interference from the Trump Administration.” 

Troutman Sanders will continue to monitor CFPB developments under House Democrats’ leadership in 2019.