It’s clear from the recent testimony to Congress of Holly Petraeus, Assistant Director of the CFPB’s Office of Servicemembers Affairs, that the CFPB is looking closely at various kinds of loans made to military personnel and their family members. One category of loans on the CFPB’s hit list are private student loans to finance tuition at for-profit schools. The CFPB questions whether these schools are worth the money they cost to attend and students understand what it takes to repay their loans. Car loans are also on the CFPB’s hit list, with spot financing a particular concern. Mrs. Petraeus indicated that although the CFPB’s authority as to auto dealers is limited, it has started to coordinate with the FTC and Fed on military auto issues as required by Dodd-Frank.
Mrs. Petraeus also took aim at installment lending to servicemembers, with her comments perhaps signaling how the CFPB may seek to further restrict military lending. Her targets included mall kiosks providing financing for “high-priced” electronics (that she considers to “often [be] overpriced to start with”), rent-to-own stores and, in her words, “the latest installment loans that manage to exist just outside the definition of payday loans as written in the rule implementing the Military Lending Act.” As an example, Mrs. Petraeus referred to an internet lender who “without a credit check” was loaning up to 40 percent of a servicemember’s take-home pay at APRs up to 584%. And she found it noteworthy that this lender had mentioned on its website that it was exempt from the Military Lending Act’s 36% APR cap because it was offering open-end revolving credit lines rather than closed-end loans. Mrs. Petraeus saved some of her ammunition for debt collectors, stating that the CFPB believes many collectors attempting to collect from servicemembers and their families are violating the FDCPA.