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Fed Agency Charged With Being Cop On Beat To Protect Vets From Shady Lending Practices—Like For LI Mortgages—Is No Longer Effectively Policing Industry 

Schumer Wants Consumer Financial Protection Bureau (CFBP) Back On The Beat To Patrol Lenders; Cites LI Homeowner’s Troubling Experience To Help Make Case 

Schumer: The Feds Need To Hook Loan Sharks Targeting LI Service Members—Not Allow Them To Feed on Our Brave Servicemembers 

Standing alongside an active duty Long Island service member and other vets, U.S. Senator Charles E. Schumer revealed today that greedy and now emboldened lenders could be especially targeting Long Island vets. Schumer highlighted a recent and poor decision by the federal government’s top consumer watchdog—the CFPB—to allow shady banks, credit card companies and other lenders to go largely unpoliced across the vet-lending industry that puts service members and their families at risk. Schumer demanded the CFPB get back on the beat and detailed a Long Island story to make the case to the feds. According to vets and consumer advocates, tens of thousands of veterans have been affected by fraudulent lending practices that break the rules of the Military Lending Act in recent years. And that the CFPB’s job has been to prevent this from happening, something they had success on prior to the recent policy changes. 

“Our Long Island service members and vets have served, or are serving, this country with great honor, so it would be a giant disgrace for the federal government to hide its head in the sand when real concerns of predatory lending rear its ugly head,” said U.S. Senator Charles Schumer.

“The Feds need to hook loan sharks targeting Long Island service members, not allow them to go on a feeding frenzy in Freeport, or anywhere else across Long Island. And I worry that with the administration taking the financial cops off the beat, who ensure the Military Lending Act is being followed to the letter of the law, will have a domino-like effect on many vets who could become new victims to financial fraud. The CFPB needs to get back to doing the full job Congress empowered it to do and protect vets because as long as there are loans, there will be predatory lenders who try and target our nation’s service members and trick them into ridiculously high interest rates, unjustified closing costs and other bad deals that can plummet them into disastrous debt,” Schumer added.

“Due to the high prevalence of predatory lending against veterans and active duty military and a lack of education in the VA loan process, our service men and women are at a high risk for being the victims of bad actors looking to make a buck,” said Michael Aharoni, Founder of Vets EDU. “I want to thank Senator Schumer for sounding the alarm on this issue and for pushing back on this silly decision by the CFPB.”

“After dutifully serving our country overseas it’s a sad state of affairs that when they come home, our veterans and active military face financial predators looking to fill their pockets off of their hard earned sacrifices,” said Freeport Mayor and Vietnam Veteran Robert Kennedy. “That’s why it’s important we keep the cop on the beat, so to speak. I want to thank Senator Schumer for advocating for veterans everywhere and pushing the CFPB to do the right thing.”

“Our veterans deserve the best when they come home and look to lay down roots in our community, not a new battle for their financial security,” said Assemblyman Steve Stern. “As a member of the Veteran Affairs Committee of the New York State Assembly, I have worked to help educate the men and women who serve all of us about the financial dangers they face from predatory lenders. I want to thank VetsEDU and Senator Schumer for their advocacy and strong commitment to our veterans on Long Island and across our great nation.”

According to new warnings and an advertisement issued by Long Island’s Veterans Education Success, service members have been targeted by predatory lenders with renewed vigor, “with 300% interest rates and other abuses.” Congress acted against these abuses by passing the Military Lending Act, the result of a bipartisan effort to protect service members against financial fraud and high interest rates. The MLA’s protections include guidelines for bank and non-bank lenders. Amongst other protections, the MLA protects active-duty service members and their families by capping their interest rates at 36%. Additionally, lenders cannot push service members into forced arbitration or charge a penalty for early payment.

Long Island service member, Kerry-Ann Haughton, a member of the Army Joint Task Force, was recently a victim of predatory lending practices when a bank approached her to help facilitate the mortgage on her Freeport home. The bank inflated Ms. Haughton’s closing costs and payments after she was issued a pre-approval from the bank to buy a home and after she finished her home-hunting process. Her closing costs were tens of thousands of dollars more than she was told to expect. Mrs. Haughton explained her situation and noted many vets experience these kinds of things.

In response to these concerns, this past August, Schumer, along with other senators, sent a letter to Mick Mulvaney, the Director of the Office of Management and Budget and Acting Director of the Bureau of Consumer Financial Protection citing grave concerns that the Consumer Financial Protection Bureau (CFPB) will no longer protect service members and their families by including the Military Lending Act (MLA) as part of the CFPB’s routine lender examinations due to a purported lack of authority. They urged the CFPB to continue protecting service members under the MLA. But now Schumer worries the lax protections have emboldened shady lenders to do their worst, and potentially target places like Long Island. So, he is sounding the alarm locally and urging the feds to step in and police the beat.

According to reports, the CFPB has effectively protected service members and their families with its oversight and proactive checks on lenders. Since 2011, CFPB’s enforcement actions have resulted in more than $130 million in relief to affected service members and they have handled more than 72,000 consumer complaints. Schumer explains that if the administration rolled back their proactive checks on lenders, the CFPB would rely solely on service member complaints to identify lenders in violation with the MLA.

A multitude of agencies, advocacy groups, and attorneys general including but not limited to the National Military Family Association, AMVETS National Headquarters, High Ground Veterans Advocacy, and Attorney General Josh Stein have also urged the administration to continue to protect service members against predatory lenders under the Military Lending Act. Schumer also said that high-interest loans can have devastating effects on service members and their families. A high-interest loan could prevent a service member from owning a home, buying a car, or ultimately providing for their family due to substantial debt and bad credit.

Schumer wants all service members and their families to be aware of mortgage offers that sound too good to be true. The Consumer Financial Protection Bureau and the VA have issued past warnings detailing what predatory tactics to look out for. These include:

  • Operational Environment –Predatory VA lenders may create a hostile environment using aggressive and potentially misleading advertising and sales tactics.
  • Deceptive advertisement tactics to watch out for according to the CFPB:
    • Offers to skip one or two mortgage payments
    • Offers to receive an escrow refund
    • Low-interest rates without specific terms
    • Aggressive sales tactics

Schumer’s and colleagues letter to OMB Budget Director Mulvaney appears below: 

Dear Director Mulvaney:

We write regarding reports that the Consumer Financial Protection Bureau (CFPB) will no longer protect service members and their families by including the Military Lending Act (MLA) as part of the CFPB’s routine lender examinations due to a purported lack of authority.  These reports are puzzling because the CFPB already possesses the authority to enforce the MLA and examine many types of lenders for the purposes of “detecting and assessing risks to consumers and to markets for consumer financial products and services.”  The CFPB should not be abandoning its duty to protect our service members and their families, and we seek your commitment that you will utilize all of the authorities available to the CFPB to ensure that service members and their families continue to receive all of their MLA protections.

By enacting the MLA, Congress sent a clear bipartisan message that high-cost lending is a clear risk to military consumers that must be addressed to also protect military readiness.  Indeed, among its provisions, the MLA caps the annual interest rate for an extension of consumer credit to a service member or his or her dependents at 36%.  CFPB examinations and the CFPB’s Office of Servicemember Affairs have been critical components of ensuring the detection and prevention of risks to military consumers.  Such examinations serve as the early warning system for MLA deficiencies so that they do not snowball into costly losses for service members and avoidable litigation costs and penalties for lenders.

Given your senior role at the Office of Management and Budget, we are sure you are aware that the MLA also helps the Department of Defense (DOD) to save taxpayer funds based on the following DOD justification for its MLA rule:

“Losing qualified Service members due to personal issues, such as financial instability, causes loss of mission capability and drives significant replacement costs. The Department estimates that each separation costs the Department $58,250.  Losing an experienced mid-grade noncommissioned officer (NCO), who may be in a leadership position or key technical position, may be considerably more expensive in terms of replacement costs and in terms of the degradation of mission effectiveness resulting from a loss of personal reliability for deployment and availability for duty.”

Needlessly stopping MLA examinations altogether and choosing instead to rely on reports of MLA violations after they occurred is further perplexing given that the CFPB is already conducting lender examinations of credit products that are also subject to the MLA.  Such a policy decision would be both inefficient and irresponsible to require a CFPB examiner to ignore as part of his or her examination risks to military consumers who are protected by the MLA.  In addition, for our service members, especially those who are deployed overseas facing hostile fire, it is unreasonable to place the burden of detecting and reporting MLA abuses on service members, especially when they should be given every opportunity to focus squarely on their missions. 

What the CFPB is reported to be contemplating is equivalent to forcing our armed forces to stop using radar, sonar, and other early warning technologies and instead react to threats as they occur.   No one would force our armed forces to do so, and the CFPB should not similarly force any of its examiners to turn a blind eye.  For generations, Americans have set partisanship aside and have made every effort to provide service members and their families with all the resources and protections they deserve. We ask no less of you and, as such, seek your commitment that you will continue the CFPB’s tradition of ensuring that service members and their families receive all of their MLA protections by utilizing all of the authorities available to the CFPB.  


U.S. Senator Charles Schumer