Protect the Military Lending Act

Standing with the troops requires more than lip service. It also requires action.  

When the Pentagon found that predatory payday loan shops and unethical car dealers were trolling military bases and aggressively targeting the troops with interest rates of 300 percent and higher, the Pentagon urged Congress to act. And act they did, because those who defend our nation deserve to be protected from predatory lenders. Congress rallied around our troops more than a decade ago in the near-unanimous, broad bipartisan enactment of the Military Lending Act (MLA) to protect active-duty service members and their families from financial ruin.

However, unfolding before us now, Consumer Financial Protection Bureau (CFPB) Acting Director Mick Mulvaney has vowed to end proactive oversight of payday lenders and other predatory lenders, accusing his own agency’s supervisors of being “overly aggressive.” This marginalization of crucial protections for our troops will re-invite exposure to predatory practices.

{mosads}Just one high-interest payday loan can have a cascading effect — ultimately robbing a service member of the ability to own a home, buy a car, or even provide for their family. For example, a service member might borrow $800 for a broken refrigerator and find the debt cascades quickly into thousands of dollars. Like quicksand, these loans are easy to slip into but nearly impossible to escape.

The MLA’s protections include clear-cut guidelines for bank and non-bank lenders. Among them, lenders can’t charge service members higher than a 36 percent interest rate, can’t push them into forced arbitration, and can’t charge a penalty for early payment.

Previously, using its authority to supervise for risk to consumers, the CFPB conducted periodic, proactive checks on lenders to ensure compliance with the MLA; the oversight worked as intended. Since its creation in 2011, the CFPB has delivered more than $130 million in relief to military members and handled more than 72,000 consumer complaints from service members and their families. In the past, the bureau had a strong track record of taking action to protect consumers including service members and their families.

But Mr. Mulvaney would undo that. Under his proposed changes, the CFPB would rely on service member complaints to identify violations of the law. This is unrealistic, given the demands on the troops to focus on their mission. Eliminating proactive oversight will put our armed forces back in the crosshairs — risking readiness, damaging morale, and adding an unnecessary financial burden to our all-volunteer force.

The impact is not only on service members and their families. When service members are in financial hardship, they can lose their security clearance and eligibility to serve. And the damage goes further. The Pentagon estimates it loses more than $57,000 in recruiting and training costs for each involuntary separation of a service member. And, each year, as many as 7,957 service members are involuntarily separated where financial distress is a contributing factor. Overall, the Department of Defense (DOD) estimates the MLA saves it as much as $133 million each year.

Congress made great strides to put together a bipartisan, bicameral Military Lending Act, passed into law to provide the much-needed protections. Weakening these protections will lead to exponentially problematic results, compounding an already constrained military recruiting and retention environment.

Thanking troops for their service goes beyond empty expressions of gratitude. It requires taking action to stand with the troops when predatory lenders come trolling, to ensure they’re not plunged into a lifetime of debt and bad credit. As a united front, we forcefully oppose any attempt to weaken the Military Lending Act.

We were proud to join with other veteran and military service organizations in a full-page ad that was placed this month with many newspapers nationwide, sharing our concerns and calling on our federal leaders to preserve military protections. Join us, by adding your name at KeepMilitaryProtections.org.

Joyce Wessel Raezer is executive director of the National Military Family Association. Dana T. Atkins, a retired lieutenant general with the U.S. Air Force, is president and CEO of the Military Officers Association of America.