The CFPB released on Tuesday guidelines to its examiners on how to identify consumer risk and harm related to violations of the Military Lending Act during their oversight of payday lenders.
The MLA, which was passed in 2007, was designed to provide greater consumer protections for military families. The CFPB’s new guidelines will be published in an updated exam guide also released by the agency on Tuesday.
“Protecting servicemembers is a priority for the CFPB,” CFPB Director Richard Cordray said. “We will use the authority Congress gave us to enforce the Military Lending Act and to safeguard our men and women in uniform from illegal payday loans.”
Payday loans are typically small-dollar loans designed to bridge a cash shortage between paychecks or benefits. Dodd-Frank mandated that the CFPB begin supervising payday lenders—an effort it undertook in January 2012.
The Department of Defense issued a report in 2006 that found predatory lending practices by payday lenders near military bases threatened military personnel and their families.
Under the MLA, annual percentage rates on payday loans must be capped at 36 percent, loans cannot roll over, service members are not required to waive their consumer protection rights and bans lenders from requiring military members to pay by allotment.