CFPB Restarts MLA Exams

The Consumer Financial Protection Bureau (CFPB) recently issued an interpretive rule that reasserts its authority to use Military Lending Act (MLA) exams to protect servicemembers from overpaying for financial services.

The CFPB started reviewing lenders’ records in 2013, but stopped performing exams in 2018 under Acting Director Mick Mulvaney, who argued that the Bureau did not have the authority to conduct the examination under federal law.

“The Bureau believes that it does have [that] requisite authority, and that the view that it originally took in 2013 was the correct one,” said the CFPB, according to Banking Dive. The agency “does not find [the previous administration’s] beliefs persuasive and will now resume MLA-related examination activities.”

In January, Acting Director Dave Uejio signaled that the CFPB’s official policy would be to supervise lenders to ensure compliance with the MLA. Though it hasn’t been conducting exams, the Bureau has flagged companies for potential MLA violations this past year.

There is, however, unspecific language in the MLA about supervisory authority, but the 2010 Dodd-Frank Act gave the CFPB authority to examine banks, nonbanks, and credit unions for risks to consumers. The agency stated that potential risks to servicemembers and their dependents “fall squarely in that category.”

Passed in 2006, the MLA caps interest rates at 36 percent for military borrowers on consumer loans. It also provides restrictions on financial products like auto and payday loans for servicemembers and their dependents.