The CFPB has issued a new “snapshot of servicemember complaints.” The report states that as of November 2015, the CFPB had received about 2,500 complaints from servicemembers, veterans and their dependents about high-cost consumer credit. These complaints were submitted under two complaint categories: the “payday loan” category or under the “debt collection” category with “payday loan” indicated as the sub-product. The payday loan category represented 3 percent of total servicemember complaints while the payday loan sub-product category represented 19 percent of servicemember complaints submitted under the debt collection category.
The CFPB comments that “given the overall size of the marketplace for high-cost consumer credit products, the number of debt collection complaints servicemembers, veterans and their dependents submitted stemming from these loans is high. This suggests, in part, that military consumers struggle more with repayment of high-cost credit products, as compared to other types of credit.” The CFPB also comments that “the good news is that recent updates [to the Department of Defense (DoD) regulation implementing the Military Loan Act (MLA)] should generally help servicemembers and their families avoid this type of high-cost debt going forward.”
The report includes a summary of the amendments to the MLA regulation published by the DoD in July 2015 which dramatically expanded the MLA’s scope. MLA coverage was previously limited to only three types of consumer credit extended to active-duty service members and their dependents: closed-end payday loans with a term of 91 days or less in which the amount financed does not exceed $2,000, closed-end vehicle title loans with a term of 181 days or less, and closed-end tax refund anticipation loans. The amendments extended the MLA’s 36 percent interest cap and other restrictions to a host of additional products, including credit cards, installment loans, private student loans and federal student loans not made under Title IV of the Higher Education Act, and all types of deposit advance, refund anticipation, vehicle title, and payday loans (residential mortgages and purchase-money personal property loans are excluded). The amended regulation will apply only to consumer credit transactions or accounts that are consummated or established after October 3, 2016 for most products, and after October 3, 2017 for credit cards.