CFPB to renew focus on military families [VIDEO]
Toward the end of last year, the Consumer Financial Protection Bureau spent the latter half of 2014 making efforts to mitigate the financial challenges servicemembers face, and a recent release from the agency seems to indicate a continued focus on military families in 2015.
Assistant Director of the CFPB’s office of servicemember affairs Holly Petraeus recently noted in a press release that the bureau will continue its efforts to protect military families. She explained that servicemembers often face difficulties the rest of the population doesn’t have to, such as deployment and continuous moving, and that these realities can present financial challenges. The release also contained reference to efforts the bureau will be making to keep military families safe in the future. These include having CFPB examiners pay special attention to the challenges that military members face, and making it easier for servicemembers to report complaints to the bureau.
Actions the CFPB took to protect servicemembers in 2014
This isn’t the first time that the CFPB has addressed financial challenges that servicemembers face in recent months. In mid-December, the bureau announced that three companies had agreed to a settlement to pay $2.5 million in refunds to military members allegedly targeted under an illegal debt collection scam. The action also included a $100,000 penalty against the three companies - Freedom Stores, Freedom Acceptance Corp. and Military Credit Services.
The CFPB explained that the three firms penalized targeted over 3,500 servicemembers with lawsuits in Virginia – where the majority of these persons did not live or didn’t sign a financing contract. Because of this, the rulings defaulted to favoring company, which led to wage garnishment and liens. Also at issue were circumstances that often arose when a servicemember’s friend or family member would give permission to a lender to collect a one-time payment. Following the initial withdrawal, the lenders at fault would continuing collecting payments.
This wasn’t the first time in 2014 the CFPB issued fines for violations of servicemembers’ rights either – the bureau announced it had caught a retail company operating a scam near military bases. USA Discounters allegedly charged military personnel with a $5 fee for debt protection under the Servicemembers Civil Relief Act, though there is no need for a fee, since the legislation itself provides the financial safeguards afforded to military members. The $5 charge was included in 70,000 transactions since 2009, according to the bureau.
With exploitative lending still a problem, military focus likely to continue
Toward the end of 2014, the CFPB released a report on servicemembers’ debt and concluded that more efforts have to be put forth to protect servicemembers from unscrupulous lending practices. This study came a few months after the Department of Defense announced a new initiative to close lending loopholes that have allowed predatory lenders to exploit military personnel. The bureau’s report found that 22 percent of servicemembers took out over $50 million in deposit advances through a 12-month stretch. The CFPB estimated that for those advances, the individuals paid a total of $5 million in fees.
“The findings indicate that some depository institutions extended millions of dollars in deposit advances to servicemembers with APRs that typically exceeded 300 percent,” the report explained.
Lenders should pay close attention to any guidelines that may provide further direction as to how to address lending to military personnel. Special protections afforded to them, such as the Servicemembers Civil Relief Act, make them a class of people that lenders must extra care to treat properly due to the additional financial safeguards provided to them. With last year a big one for penalizations regarding military lending scams, it seems logical that 2015 should follow suit.
By: Equity National February 20, 2015 Closing