Trump's Shutdown Of Financial Watchdog Could Burden Military Families

Yahoo

6 days ago

The Trump administration's destruction of a consumer watchdog agency will end up hurting veterans and active members of the armed forces who are vulnerable to predatory banking and credit practices, according to a new report from public-interest groups.
The Consumer Financial Protection Bureau has been investigating a growing number of complaints from veterans who say they were fleeced by banks and credit card companies in recent years. But the White House has tried to shut down the CFPB and defund it as the Trump administration pursues draconian cuts across the federal government.
Those who served or are serving their country face unique risks that make them 'targets for scams and inflated prices,' including higher rates on auto loans than the general population, the report from the U.S. PIRG Education Fund and Frontier Group found.
'America's servicemembers, veterans and their families have benefited tremendously from the work of the CFPB,' the authors write, noting the agency has processed 400,000 complaints from those groups since 2011. 'To protect those who serve, policymakers must protect the CFPB.'
Congress created the CFPB in the wake of the 2008 financial crisis, tasking it with protecting consumers from abuses by banks, credit unions, payday lenders and mortgage servicers, among others. Part of the agency's responsibilities is enforcing the Military Lending Act, which includes specific protections for active-duty service members and their families, such as caps on lending rates.
Since 2011, the CFPB has recouped more than $350 million on behalf of servicemembers and veterans who said they were exploited, according to the report.
Mike Litt, one of the report's co-authors, said the idea of protecting those who served their country has been baked into the CFPB's mission. When someone files a complaint against a bank or other firm, the CFPB invites them to note whether they have ties to the military.
'Service members and all Americans could pay a price with the dismantling of the CFPB,' Litt, the consumer campaign director at U.S. PIRG, told HuffPost. 'In the case of the service member complaints, what we found is nearly 1 in 4 complaints resulted in some kind of relief, whether monetary or non-monetary,' like someone's credit report getting fixed.
Litt noted that the life circumstances of active-duty service members can make them more susceptible to predatory behavior. For instance, they tend to be young, they move a lot and they often have to manage their finances while abroad. Those between ages 18 and 24 are more likely to take out auto loans or credit cards than their civilian counterparts.
The CFPB said last year that the number of complaints it received from the military community in 2023 was nearly double the number it received in 2021. A frequent grievance from service members was not receiving a 6% interest rate on auto loans they took out before going on active duty, as they were entitled to under law.
Such complaints end up in the CFPB's public database, where Litt says the attention and risk of embarrassment often shames companies into fixing the problem. Their analysis found that 98.5% of service members' complaints received 'a timely response.'
'Because the database is public, companies have an incentive to at least respond,' he said.
Republican lawmakers have bashed the CFPB for years, but the agency has never been so imperiled as it is under Trump. In February, Trump's acting CFPB director, White House Budget Director Russell Vought, locked the agency's staff out of their headquarters and ordered them to stop all their work. Trump said at the time that the CFPB was 'very important to get rid of.'
A federal judge later blocked the administration's plan to lay off the vast majority of CFPB employees, but that case is under appeal. Meanwhile, the administration is moving ahead as if the courts will bless its plan to destroy the agency: Staffers recently received an email ordering them to clear out their offices in the coming days, Bloomberg Law reported.
Last month, the agency's leadership also rescinded dozens of CFPB policy documents, suggesting a major pullback on enforcement even if the courts thwart Trump's mass layoffs. The move was applauded by the American Bankers Association, a leading lobby for the banking industry.
Litt noted that the yanked documents included guidance for the public complaint database, which he said could be a 'first step' for shutting it down.
'The withdrawal of that guidance suggests that they are intending to or might hide the database from the public,' he said.