AG Grewal Stands with New Jersey's Military Families, Opposes Rollbacks of Federal Protections for Service Members

TRENTON – Acting to protect members of our armed forces from inflated interest rates and other predatory lending practices, Attorney General Gurbir S. Grewal today urged the federal Consumer Financial Protection Bureau (CFPB) to scrap a plan to halt its examinations of lenders for compliance with the Military Lending Act.

The Military Lending Act was enacted in 2006 to protect service members – many of them young and inexperienced at managing their finances – from amassing unmanageable debt and being forced to leave military service as a result. Bipartisan amendments to the Act in 2013 specifically directed the CFPB to enforce the statute.

Reports emerged in August that CFPB Acting Director Mick Mulvaney was planning to suspend the agency’s routine examinations of lenders for Military Lending Act violations. If these examinations are suspended, the CFPB will no longer engage in proactive oversight of banks, thrifts, credit unions, payday lenders, and other loan originators to determine whether they are complying with the Military Lending Act.

In today’s letter to Acting Director Mulvaney, Attorney General Grewal and a bipartisan group of 32 other State Attorneys General contend that a decision to stop examining lenders for Military Lending Act compliance would significantly harm service members and abdicate one of the agency’s statutory responsibilities.

“We owe New Jerseyans in the armed forces, and members of the armed forces who are stationed here, protection from exploitative lending practices that can interfere with their commitment to our country’s national defense,” said Attorney General Grewal. “Our service members and their loved ones deserve a federal consumer protection agency that will stand with them, not side with predatory lenders and financial institutions trying to make a quick buck off military families.”

The letter from the State Attorneys General points out that the Department of Defense has made clear that the financial stability of service members and their families “is critical to sustaining the all-volunteer force and maintaining its readiness.”
“Each year, thousands of well-trained service members are compelled to leave military service because they experience financial distress that leads to the revocation of their security clearances,” the letter notes.

Military Lending Act regulations adopted by the Department of Defense in 2015 were designed to reduce the number of involuntary separations of service members due to financial distress by between 5 and 30 percent.

The State Attorneys General express disappointment concerning public reports that the CFPB did not consult with the Department of Defense before suspending its Military Lending Act examinations.

According to Acting Under Secretary of Defense Stephanie Barna, who is quoted in the multi-state letter, examinations of lenders for Military Lending Act violations “contribute to effective industry education about, and compliance with, the [law].”

Although reports of the CFPB’s policy change indicate that Acting Director Mulvaney has concluded that the agency lacks statutory authority to examine lenders for Military Lending Act violations, the State Attorneys General explain that Congress gave the CFPB power to enforce the Military Lending Act using any applicable authorities available to it, including the agency’s examination authority.

By eliminating proactive reviews of lender compliance with the Military Leave Act, the Attorneys General note, Acting Director Mulvaney’s “proposal will limit the CFPB’s protection of service members to reactive enforcement.” The letter concludes by urging the CFPB to reconsider its policy change, and adds that the participating states would welcome the chance to conduct “joint investigations” with the CFPB aimed at protecting service members from financial exploitation.

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