The agency will now depend completely on complaints from the military and potential victims
The Consumer Financial Protection Bureau is set to withdraw a regulatory tool that identifies lender violations of the Military Lending Act, a law that guards service members from financial fraud, predatory loans, and credit-card gouging, according to a New York Times report.
Internal agency documents revealed that Acting Director Mick Mulvaney intends to suspend supervisory examinations because the legislation does not explicitly lay out such proactive oversight.
Despite scrapping the examination, the CFPB will continue individual cases against lenders who violate the 36% annual interest-rate cap mandated under the law. The consumer watchdog will also still supervise lenders under other laws.
However, former enforcement officials of the CFPB told the publication that the examinations are the most powerful method for proactively finding violations and patterns of abuses by lenders suspected of wrongdoing.
Advocates for military families who have called on the government to respond more effectively against unscrupulous lenders were surprised by the proposal, according to the report.
Administration officials said the dozens of examinations conducted by the CFPB during the Obama administration did not face any significant legal opposition. Additionally, they noted that the oversight tool is not being challenged by payday and other lenders based on the law.
With the change, the CFPB will now rely solely on complaints rather than on investigations that might uncover similar patterns. Complaints will be coursed through the CFPB website and hotlines by the military as well as people who think they might have been victimized.
According to a spokesman for Mulvaney, the proposed change follows criticisms of the aggressive enforcement by former CFPB Director Richard Cordray, which was sought to be curtailed by a top-to-bottom review of the bureau’s procedures. Spokesman John Czwartacki said Mulvaney is calling on Congress to pass a bill that would permit the supervisory examinations.
