News arrives just days after CFPB found to be ending supervision of companies to ensure they’re not illegally overcharging military servicemembers
WASHINGTON, D.C. – Today, NPR reported that the White House is advocating for changes that would make it easier for auto dealers to fleece active duty military servicemembers. Specifically, the White House plan would let auto dealers pressure military customers into adding an overpriced gap insurance policy to their car loan. This would be a dramatic change to current rules under the Military Lending Act (MLA), a law that protects active duty servicemembers from predatory financial products.
Separate from this news, on Friday, it was discovered that the Consumer Financial Protection Bureau (CFPB) would no longer engage in supervision of payday lenders and other companies to verify that they are complying with the MLA and not overcharging servicemembers. The MLA was enacted, after a 2006 Department of Defense report detailed how widespread predatory lending was harming our troops, their morale, and military readiness.
Center for Responsible Lending (CRL) Federal Advocacy Director, Scott Astrada, issued the following statement:
Auto dealers should not be allowed to rip-off military servicemembers with exorbitantly priced add-on insurance.
The Military Lending Act, which passed with broad bipartisan support, was enacted to prevent our troops from being taken for a ride by financial scam artists. It must not be weakened.
Additional Background
Auto gap insurance is intended to protect consumers from the extreme loss in value of a car getting totaled, leaving consumers with a devalued asset they still must pay back a loan for. While this policy is readily available from insurance companies for $20 or $30 a year, auto dealers have been found to use their leverage with customers to push them to, on-the-spot, purchase a plan for hundreds or more than a thousand dollars annually.
Organizations advocating for military servicemembers, veterans, survivors, and military families have written Congress in strong support of the MLA and the CPFB’s Office of Servicemember Affairs.
For more information, or to arrange an interview with a CRL spokesperson on this issue, please contact Matthew Kravitz at matthew.kravitz@responsiblelending.org or 202-349-1859.