Last week, the Consumer Financial Protection Bureau (CFPB) issued an interpretive rule regarding their authority to resume examinations under the Military Lending Act (MLA). The MLA seeks to protect military borrowers by:
- Imposing a maximum annual percentage rate of 36%.
- Prohibiting lenders from requiring borrowers to arbitrate disputes or waive their rights under federal or state law.
- Prohibiting lenders from requiring borrowers to use military allotment to repay a loan.
- Prohibiting lenders from charging borrowers prepayment penalties.
In 2018, the CFPB’s leadership discontinued MLA examinations based on the belief that Congress did not specifically confer MLA examination authority on the CFPB. Under new leadership, the CFPB disagrees, stating that, the CFPB has authority under the consumer Financial Protection Act of 2010 to examine supervised nonbanks to asses and detect risks to consumers and “…the risks to active-duty servicemembers and their dependents from conduct that violates the Military Lending Act (MLA) fall squarely within that category.”