The American Bankers Association has sent a letter to the Department of Defense “to alert the Department to shortcomings” in the CFPB’s study entitled “The extension of high-cost credit to servicemembers and their families” and the CFPB’s comment letter endorsing the DoD’s proposed revisions to its Military Loan Act regulations (which included the study as an appendix). In December 2014, the ABA and four other trade groups jointly submitted a comment letter to the DoD on the proposal. In its follow up letter, the ABA notes that the CFPB’s study was publicly released after the due date for comments on the proposal and was “therefore unavailable for reference and comment by the public.”

Labeling the CFPB’s study “incomplete and flawed,” the ABA urges the DoD not to rely on the CFPB’s comment letter or study “to extend the MLA rule’s coverage to insured depository institution products like DAPs [meaning deposit advance products], credit cards, or other mainstream consumer financial products that have not been demonstrated to cause the kinds of problems for servicemembers and their spouses and dependents that were targeted by the MLA.” According to the ABA, the study on which the CFPB “bases its advocacy for the adoption of a Department proposal does not meet the Bureau’s own evidence-based standard that it would apply to its own rule-making. In other words, the Department should not adopt changes to the MLA regulations on the basis of a deficient administrative record from the Bureau that would not pass muster under the Bureau’s own regulatory obligations under the Dodd-Frank Act.”

The primary focus of the ABA’s criticism is the section of the study devoted to DAPs. The ABA makes the following key comments:

• The ABA observes that the CFPB’s comment letter asserts that there is a differential exposure of military families to DAPs when compared to the population at large, and thus “intimat[es] that this differential warrants covering military families’ usage of DAPs under the MLA.” The ABA notes that, in fact, the study pointed out in footnote 11 that whatever differential penetration the CFPB calculated had not been evaluated against other explanatory variables that might eliminate the statistical significance of such a superficial penetration number and warned that this percentage “does not mean that being a servicemember makes a person more likely to use deposit advance products.” The ABA states that the CFPB ignored this important point in its comment letter.
• The ABA comments that it is disappointing that the study “publishes such an innuendo when the Bureau has within reach the information and capability of testing such explanatory variables. However, rather than supply the Department with a thorough analysis that would provide a probative basis for considering differential treatment of DAPs under the MLA, the Bureau fails to meet its responsibility to inform authoritatively the Department as part of its consultative role.” The ABA urges the DoD “to take no action in connection with the supposed differential exposure of military personnel and their spouses and dependents to DAPs until the Department is able to pursue and obtain the explanatory analysis identified by but missing from” the CFPB’s study.
• The ABA notes that the CFPB’s comment letter endorses MLA coverage of DAPs without addressing the merits of DAPs or making explicit whether the CFPB is excluding the product from sevicemember choice alone or considers the product ill-advised for all consumers. The ABA observes that the CFPB “has spent the better part of two years studying payday loans and other small dollar short-term consumer credit such as DAPs and we understand it is on the verge of initiating a rule-making in this area that will cover all consumers.” The ABA urges the DoD, in considering the CFPB’s comment letter, to “take into account that the Bureau has hardly begun its own formal and public consideration of the merits of DAPs, so any Bureau views should be considered at most preliminary hypotheses, untested yet by full and adequate research and public consideration.”