New report shows that agency’s consumer protection mission is critical.
Three years ago, a congressional hearing put a spotlight on shameful home loan practices that subjected military families to overcharges, harassing collection calls, “accidental” foreclosures and the denial of special legal protections aimed at easing the financial strain of active-duty service.
While banking behemoths promised to fix mistakes, an alarming new report from a fledgling federal consumer protection agency makes it clear that abuses of military consumers are still occurring across the financial services industry and that heavy lifting is needed on the home front to enforce existing safeguards against predatory loans, evictions and default judgments and to guard against deceptive debt collectors.
Doing so is not just in the troops’ best interest, it’s also in the nation’s best interests. Especially when forces are on the front lines, “We don’t want them to worry about financial problems while they are worrying about the nation’s business,’’ said Rep. Tim Walz, a Democrat who represents southern Minnesota. Walz is a former Army National Guard sergeant major.
The report — detailing dubious practices such as default judgments and attempts to collect nonexistent debts, as well as lack of awareness about military protections for home and student loans — was released this month by the Office of Servicemember Affairs, part of the new and embattled Consumer Financial Protection Bureau. The CFPB was established in sweeping bank reforms enacted in 2010 after the mortgage-meltdown-fueled financial collapse of 2008.
The CFPB’s mission: to bring a consumer protection perspective to financial regulation and to provide federal oversight to parts of the market where it had been sorely lacking, such as payday lenders, debt collectors and credit reporting agencies. There was such concern about military families when the law was passed that Congress specified that the new agency would have a dedicated office for military consumers. Holly Petraeus, who has a long family history of military service, is the office’s assistant director.
There are already solid laws on the books to protect the financial security of military men and women. Provisions under the Servicemembers Civil Relief Act include a cap on interest rates, stays of proceedings and protections from evictions. The Military Lending Act guards against loans notorious for high interest rates, such as payday loans and auto title loans.
The problem is that service members often are unaware of these safeguards. Many financial firms appear to be as well or, worse, they choose to ignore them, judging from the 14,100 complaints filed by military consumers with the CFPB from July 2011 to February 2014. The volume of complaints filed with the agency surged 148 percent from 2012 to 2013, according to the report.
That increase is not only a reflection of military consumers’ growing awareness of the CFPB, but of the need for an agency to assist them and all consumers with concerns like this. So far, the agency has recovered more than $1 million on behalf of military consumers. More important, by tracking mistreatment, spotlighting existing protections and helping consumers get resolution, the CFPB is helping to deter future abuses of our troops.
The good work by Petraeus and this agency should be lauded by policymakers. Instead, the CFPB is under attack in Congress, where the Republican-controlled House recently passed legislation to weaken it.
The CFPB has few fans within the politically powerful financial services industry. That’s not surprising. Before the agency began operation in 2011, regulators often seemed more interested in protecting financial firms than overseeing them. The CFPB puts consumers first — a much-needed change already improving the day-to-day lives of military families.
The CFPB is off to a promising start, as the new report from Petraeus’ office shows. Lawmakers should let the agency do its work instead of doing the bidding of wealthy special interests to undermine its important mission.
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