Consumer Financial Protection Bureau Enforces Military Lending Act Amid Leadership Changes

According to an article by the Sheppard Mullin firm, the Consumer Financial Protection Bureau (CFPB) has reaffirmed its commitment to enforcement by proceeding with a lawsuit against a fintech lender despite recent shifts under the new administration. The case, filed in September 2022 in the Southern District of New York, alleges violations of the Military Lending Act (MLA) and the Consumer Financial Protection Act (CFPA). 

Specifically, the Consumer Financial Protection Bureau accuses the lender of exceeding the MLA’s 36% interest rate cap, imposing mandatory arbitration clauses, failing to provide required loan disclosures, and misleading consumers about their ability to cancel memberships.

The CFPB’s decision follows the court’s rejection of the lender’s request to pause the lawsuit. The lender argued that the new administration needed time to reassess its regulatory priorities, citing the Bureau’s broader enforcement pause. However, the court required the CFPB to clarify its stance, leading to the Bureau’s confirmation that it will continue pursuing the case.

The article notes that while the new administration has withdrawn some enforcement actions, specific regulatory priorities remain unchanged. The CFPB’s willingness to proceed with litigation, even as its broader enforcement strategy evolves, highlights the continued scrutiny of lending practices, particularly those affecting servicemembers.

Financial institutions should not assume that leadership transitions at regulatory agencies will automatically lead to relaxed enforcement. The CFPB’s actions demonstrate that core priorities remain intact, such as consumer protections under the Military Lending Act and CFPA. Lenders should continue to monitor regulatory developments and ensure compliance with military lending regulations, as enforcement risk persists despite broader policy shifts.