CFPB Archives

Financial Protection for Service Members May Be Weakened by Administration

Senate Democrats have called on Consumer Financial Protection Bureau (CFPB) Acting Director Mick Mulvaney to commit to upholding servicemember protections under the Military Lending Act (MLA) after rumors circulated that the Trump administration is trying to get rid of the decade-old act.

In their letter to Mulvaney, the 49 senators wrote, “The CFPB should not be abandoning its duty to protect our servicemembers and their families, and we seek your commitment that you will utilize all of the authorities available to the CFPB to ensure that servicemembers and their families continue to receive all of their MLA protections.”

The MLA was established in 2006 and was designed to protect service members and their spouses, children, and certain other dependents from financial fraud, predatory loans, and credit gouging. Under the law, the annual interest rate for an extension of consumer credit to a servicemember or his or her dependents is capped at 36%.

The letter continued, “In addition, for our servicemembers, especially those who are deployed overseas facing hostile fire, it is unreasonable to place the burden of detecting and reporting MLA abuses on servicemembers, especially when they should be given every opportunity to focus squarely on their missions. What the CFPB is reported to be contemplating is equivalent to forcing our armed forces to stop using radar, sonar, and other early warning technologies and instead react to threats as they occur. No one would force our armed forces to do so, and the CFPB should not similarly force any of its examiners to turn a blind eye.”

“For generations, Americans have set partisanship aside and have made every effort to provide servicemembers and their families with all the resources and protections they deserve. We ask no less of you and, as such, seek your commitment that you will continue the CFPB’s tradition of ensuring that servicemembers and their families receive all of their MLA protections by utilizing all of the authorities available to the CFPB.”

Senate Democrats created the Office of Servicemember Affairs at the CFPB to serve as an independent watchdog for military personnel. Since its inception, the office has handled more than 90,000 consumer complaints from servicemembers and their families and taken action to help return hundreds of millions into the pockets of servicemembers affected by harmful practices.

By Joe Silva

On April 20, 2015, the Consumer Financial Protection Bureau (CFPB) intervened against a creditor for charging hidden fees to service members.

The Fort Knox National Company and its subsidiary, Military Assistance Company (MAC), are alleged to have charged millions of dollars in hidden fees to service members over the course of several years.

Service members would set up allotment programs with MAC that would automatically transfer portions of their pay every payday into a pooled bank account that MAC controlled, and used to make automatic payments to creditors, including auto lenders and credit cards. For this service, MAC would charge monthly fees that were often between $3 and $5.

While this is a convenience for service members, MAC was alleged to have, on several occasions, continued to collect funds from a service member’s pay, even after a debt had been paid off. These excess funds collected into a residual balance that MAC would charge hidden fees against. These fees would slowly drain the service members’ bank accounts, many times without them noticing for several months.

As a Veteran, I can speak with the voice of some experience in this matter. I set up automatic payments during my time in the Navy, but was burned on my first deployment when I wasn’t paying attention to these accounts. During that deployment, one of my debts had been bought out by another major bank, and my automatic payments stopped going through, early into my deployment. I was welcomed home by six months-worth of unpaid bills. For my next two deployments, I kept better track of my finances (as much as I could), and I also gave my mother Limited Power of Attorney over my finances, to make sure that she could act on my behalf while I was deployed. I suggest that all service members look into appointing a spouse, parent or someone they absolutely trust with some form of power of attorney while they are deployed. To find out more about Power of Attorney Basics, please visit www.militaryonesource.mil or see your command’s career counselor or admin department.

The CFPB alleges that between 2010 and 2014, MAC charged tens of thousands of service members with hidden fees of $100 or more, totaling over $3 million. The bureau alleges that MAC and Fort Knox National Company failed to clearly disclose key information about costs to their consumers, and failed to notify service members that it had charged fees.

The Fort Knox National Company and MAC have been ordered by the CFPB to provide $3.1 million in relief to the service members they overcharged. The Consent Order can be viewed at consumerfinance.gov.

Military service members volunteer and swear an oath to stand up for their country and protect it. For their dedication and sacrifice, many Americans are grateful to them. But unfortunately, there are many people who take advantage of service members. It is refreshing to see government agencies reciprocating the support of service members, and having their backs as well.

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