CFPB Issues Interpretive Rule Outlining Authority to Conduct MLA Examinations

Troutman Pepper

Troutman Pepper

On June 16, the Consumer Financial Protection Bureau (CFPB) issued an interpretive rule to explain the basis for its position that the CFPB possesses the authority to “examine supervised financial institutions for risks to active duty servicemembers and their dependents (i.e. military borrowers) from conduct that violates the Military Lending Act (MLA).”

As far back as 2013, the CFPB held the position that it had the authority to examine supervised financial institutions for compliance with the MLA. According to the CFPB, “[f]rom that time until 2018, no companies disputed the CFPB’s authority to review their MLA lending practices.” Then, in 2018, under the Trump administration, it was reported that Acting Director Mick Mulvaney made the decision to cease supervisory MLA activities for lack of explicit statutory authority.

Following his appointment as the CFPB’s acting director by President Biden, Dave Uejio quickly announced that it was now “the official policy of the CFPB to supervise lenders with regard to the Military Lending Act.” Acknowledging this back and forth history, the announcement for this interpretive rule states that “[t]he current CFPB leadership does not find” the 2018 position “persuasive and the CFPB will now resume MLA-related examination activities.” To this end, the interpretive rule also outlines the reasons why the CFPB now finds unpersuasive the prior arguments that it lacked the statutory authority to conduct MLA examinations.

We will continue to monitor and report on any development related to this matter.

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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