Trump To Make It Easier For Lenders To Defraud Veterans

Mick Mulvaney, acting director of the Consumer Financial Protection BureauGage Skidmore/CC BY-SA 2.0/Flickr

The Trump administration will wait for individual complaints rather than continue routine probes of suspicious lenders.

Routine examinations of lenders for violations of the Military Lending Act — a practice that caught some of the most egregious offenders under the Obama administration — are set to be suspended by the Trump administration, according to The New York Times.

The Military Lending Act was put in place to protect service members and their families from financial fraud, predatory loans and credit card gouging.

> 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.

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> The proposal surprised advocates for military families, who have urged the government to use its powers to crack down harder on unscrupulous lenders. The consumer bureau conducted dozens of investigations into payday and other lenders during the Obama administration without any significant legal opposition, and no lenders are currently challenging its oversight based on the law, according to administration officials.

The CFPB will continue to bring cases against lenders who charge more than the 36 percent cap on annual interest rates, but it will cease taking the proactive step of supervisory examinations meant to uncover abusive practices by lenders suspected of wrongdoing — previously one of the agencies most powerful tools.

> John Czwartacki, a spokesman for Mr. Mulvaney, said the rule change came from a top-to-bottom review of the bureau’s procedures geared at curtailing what the administration, along with lending industry executives, have criticized as overly aggressive enforcement by the bureau’s first director, Richard Cordray.

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> 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.

Under Mulvaney’s planned change, the bureau will rely entirely on individuals filing complaints before any action is taken.

> “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.”

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> “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?”

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> “We need a constant and systematic review of these companies — not just individual cases brought by the executive officer of a unit, reporting one incident at a time,” said Mr. Reed, who observed financial abuses firsthand when he served as a company commander in the 82nd Airborne Division in Fort Bragg, N.C. in the 1970s.

Studies conducted by the Department of Defense over the last ten years have found that military, veterans, and their families are four times as likely as the general population to be targeted by shady lenders.

> Since its creation under the Obama administration in 2011, the consumer agency has returned more than $130 million to service members, veterans and their families and handled more than 72,000 complaints per year, according to the agency.

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