Military and the CFPA

Tim Fernholz writes about the Department of Defense working towards building a Consumer Financial Protection Agency with Treasury (my bold):

Today, Secretary Tim Geithner followed up by meeting with David Julian, the director of the DoD’s Office of Personal Finance, and a number of other advocates for military families and consumers. Military families have experienced serious problems with consumer finance, particularly around predatory auto lending, that are indicative of broader problems in the system….Julian was more emphatic about the importance of the agency. “DOD firmly believes that the financial readiness of their troops and families equates to mission readiness and anything that we can do to help our families be financially ready, we will support the family and the mission,” he said.

This is first time that Treasury has promoted a consumer-finance meeting to the media; it’s clear they see the burgeoning alliance between the military and consumer advocates as a useful avenue to pursue the creation of a strong consumer regulator. Will Republicans oppose protections that will help keep military families from being the victims of predatory lending now that a vote against consumer protection is a vote against mission readiness?

It’s even more amusing than that. Last fall, I wrote about the Pentagon’s efforts to study and legislate the issues of consumer financial protection over at the Atlantic Business Channel. It was an interesting topic to research, since predatory lending is such a major problem for the military. There’s a problem where a lot of the study of consumer financial interactions and financial literacy initiatives are funded by credit card companies, and so it’s particularly useful to read the Pentagon’s no-nonsense study and recommendations.

The Pentagon put out a study of what kinds of consumer financial protection were needed for the military: Financial literacy. A usury cap, fees included, at 36%. Not being able to waive rights for legal actions. Proper disclosure of fees into APR. Pretty strong measures compared to the CFPA that President Obama has been proposing.

And sure enough, Republican lawmakers sprung into action. From the post:

So I’m curious if the Republicans who sponsored these measures into law will be supporting President Obama on the CFPA. Representative Geoff Davis (R-KY) proposed most of the reforms in his Military Personnel Financial Services Protection Act and Representative Sam Graves (R MO) introduced the Servicemembers Anti-Predatory Lending Protection Act to handle the Usury cap. Davis’ bill passed; Graves bill was later incorporated by Senators Jim Talent (R-MO) and Bill Nelson (D-FL) into the FY 07 DoD Authorization bill. I contacted both congressman’s offices to see if they, given that they’ve legislated pretty hard in this area of consumer financial protection, had any comment on the upcoming CFPA legislation. Rep. Graves’s office told me that they want to wait before seeing the final bill before commenting. I look forward to hearing from them — I’m curious as if their idea of what is necessary and what is sufficient has changed regarding consumer finances in the past 3 years.

Now of course Graves and Davis voted against the Frank Financial Reform Bill in the House; all the Republicans did. But did they vote for the Idaho Amendment? Yes. This is the amendment that would have killed the CFPA and replaced it with a significantly weaker counterpart. It failed, but this amendment was a known unknown going into the voting; it wasn’t clear at all which way the vote would go, and people who are serious about financial reform and consumer protection could have made a difference here. I never did check in to see why Graves and Davis voted for military consumer financial protection but not a CFPA.

Jim Talent was kicked out during the 2006 rout of Republicans. He’s a distinguished fellow at Heritage, maybe he can explain. It’s interesting, since he put in overwhelming effort as a Senator the last time the military called for help with consumer financial protection, but it seems that fellows at conservative think tanks get fired these days for expressing a dissenting opinion. And with unemployment as high as it is, I’d feel terrible asking him. But maybe one of you wouldn’t.

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1 Response to Military and the CFPA

  1. Ed says:

    The military also has free government-run healthcare, and the right failed to make that connection either.

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