Don’t shut down or weaken the Consumer Financial Protection Bureau, advocates told senators Thursday.
As financial markets change, and bad actors find more ways to prey on service members, veterans and their families, laws and protections lag in dealing with those problems, they said.
“And we rely on the Consumer Financial Protection Bureau,” said Kelly Hruska, director of government relations for the nonprofit National Military Family Association, testifying during a Nov. 2 hearing of the Senate Committee on Banking, Housing and Urban Affairs.
A lawsuit is now before the Supreme Court that challenges the constitutionality of the Consumer Financial Protection Bureau, or CFPB. If the CFPB is shut down, it will “absolutely” affect service members’ protections and rights, said Cory Titus, director of servicemember compensation and veteran benefits for the nonprofit Military Officers Association of America.
“The thought of CFPB going away is frightening,” Titus said. He cited the Bureau’s work in educating the military community, the financial community and others about the rights and protections, as well as their enforcement actions. “It’s improved the financial readiness of our force... Without a robust Bureau, service members, veterans and families would lose a vital defender in the only federal agency mandated to safeguard their financial interests.”
As a result of 39 enforcement actions since opening its doors in 2011, the CFPB returned $175 million to service members, veterans and family members, according to the CFPB’s most recent report.
Among other things, the CFPB is charged with enforcing the Military Lending Act. The MLA limits interest rates charged by certain lenders, like payday lenders, to active duty troops and families to 36% annual percentage rate. Before the MLA was enacted in 2006, some payday lenders were charging troops rates as high as 700% APR. The law, and CFPB’s enforcement of it, has dramatically reduced the number of such lenders, advocates said.
“You really can’t say you support military families and veterans while trying to dismantle the CFPB,” said Sen. Sherrod Brown, D-Ohio, chairman of the committee.
The CFPB’s complaint database, which provides a venue for service members, veterans and their families to lodge complaints about financial institutions, and to get CFPB’s help in resolving those problems, has also been helpful for the military community, said Hruska, of the National Military Family Association.
One area of concern for military families is medical debt, she said, which may seem counterintuitive given the medical benefits provided to these families. But military moves, emergency medical situations, specialized medical care and other situations can rack up this debt, she said. One example she provided was a Marine Corps family who spent $14,000 out of pocket for specialized hypoallergenic baby formula, draining their savings and retirement accounts.
She said the association applauds the Bureau’s step in September to begin the rulemaking process to remove medical debt from credit reporting.
Sen. Elizabeth Warren, D-Mass., noted that the Bureau had received about 5,000 complaints from service members, veterans and family members over a three-year period, and over half of them related to collection attempts for medical bills they didn’t actually owe.
Although military families have a valued medical benefit with Tricare, there are a variety of reasons for medical bills to be placed in collection. One reason is that Tricare may be slow to pay the medical providers, Hruska said. In some situations the bill is referred to debt collection before Tricare pays, she said.
Warren called for more robust data on the problem from the Defense Department, and for action.
As for CFPB’s efforts to remove medical debt from credit reporting, Warren said, “this is what CFPB does best. It identifies a problem that affects thousands, or sometimes millions of people, then takes direct action.”
Sen. Mike Rounds, R-S.D., said it’s important to make sure service members, veterans and their families aren’t preyed upon by bad actors. “We’ll never be able to eliminate every bad actor from the market. We can try. And we must attempt to reduce heavy-handed approaches like price controls or one-size-fits-all policies” which can also be harmful, he said.
But most important, he said, is equipping young service members and families with the financial education and tools to combat these issues, and to make sure when they leave the service, they take those tools with them, he said.
He questioned whether the financial programs offered by DoD and the services are operating as effectively as they should, and whether they are improving service members’ financial outcomes.
Brown said that while he agreed with Rounds’ statement about the importance of financial literacy, “it falls short in terms of enforcing law,” and making sure service members and their families get these protections.
Sen. Chris Van Hollen, D-Md., said he would like to see the protections of the Military Lending Act extended to veterans and to Gold Star families. Hruska noted that when a service member dies, many survivor families have “targets on their backs” because predators know about the death benefits, including the life insurance policies.
The CFPB is service members’ and veterans’ key defender against frauds and scams, Brown said.
“These corporate interests have made it clear that they will not clean up their act on their own, and they will fight anyone who tries to make them,” he said.
“Military families don’t have high-priced lobbyists. They don’t have corporate lawyers. They have the CFPB.”
Karen has covered military families, quality of life and consumer issues for Military Times for more than 30 years, and is co-author of a chapter on media coverage of military families in the book "A Battle Plan for Supporting Military Families." She previously worked for newspapers in Guam, Norfolk, Jacksonville, Fla., and Athens, Ga.