Battle Brewing over CFPB’s Authority to Monitor MLA Compliance

May 29, 2019 | Federal Regulation, News

Does the Consumer Financial Protection Bureau (CFPB) have the authority to monitor compliance with the Military Lending Act (MLA)? Senate Democrats insist that it does, but CFPB Director Kathy Kraninger believes it does not.

This complicated legal question first emerged last August when Mick Mulvaney, then acting director of the CFPB, argued that “the MLA was not a federal consumer financial protection statute and therefore Dodd-Frank did not grant the CFPB supervisory authority.” Mulvaney insisted that Congress must pass legislation providing the federal agency with supervisory authority before it could monitory MLA compliance.

Kraninger, the new head of the CFPB, agrees with Mulvaney. In January, she transmitted a legislative proposal to Congress that would authorize the CFPB to monitor MLA compliance.

“The Bureau is committed to the financial well-being of America’s service members. This commitment includes ensuring that lenders subject to our jurisdiction comply with the Military Lending Act so our service members and their families are provided with the protections of that law,” said Kraninger. “That’s why I have asked Congress to explicitly grant the Bureau authority to conduct examinations specifically intended to review compliance with the MLA.”

Senate Democrats however argue that the CFPB already has the authority and refuse to move on legislation that would codify this authority. According to American Banker, Democrats are concerned that by opening up the Military Lending Act to give the CFPB more authority over MLA, financial lobbyists may try to weaken the annual percentage rate (APR) cap of 36 percent for military service members.

“I’m arguing you already have the authority,” Senator Catherine Cortez Masto told Kraninger during a hearing in March. “It’s a change in the CFPB’s position and that’s why many attorneys general, military organizations, including Democrats on this committee and in the Senate are challenging why you made this change.”

It is unclear at this time how this question will get resolved. Both Kraninger and Senate Democrats seem unlikely to budge from their positions anytime soon.

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