Trump Mulls Rolling Back Financial Protections for Servicemembers

The story

The Trump administration is considering rolling back financial protections designed to shield military members from predatory lending practices, according to an NPR report published on Monday.

NPR said it obtained documents showing that the White House is looking at proposals that would curtail rules barring auto dealers from offering “gap insurance” to service members, and that the administration is considering a broader rollback of Military Lending Act enforcement.

Why it matters

Many servicemembers enter the military in their late teens or early 20s with little credit history, and are often targeted by auto loan financiers, credit card companies, and retail stores that hide high financing costs behind low down payments and short-term teaser rates.

Department of Defense guidelines bar automobile dealers from offering gap insurance, which covers the difference between the amount an owner owes on their car and the car's cash value, to service members. NPR reports that the Trump administration is looking to allow such insurance again.

Mick Mulvaney, the interim director of the Consumer Financial Protection Bureau (CFPB), also reportedly intends to scrap the use of supervisory examinations of lenders, arguing that such proactive oversight is not explicitly laid out in the Military Lending Act.

Proponents of the change say it will help to curtail overly aggressive enforcement of the Military Lending Act, which has the effect of making it harder (or in some cases impossible) for servicemembers to access financial services they want.

Opponents of the change point to a 2006 study that found military personnel in Colorado more than four times more likely than civilians in Colorado to have taken a payday loan.

They also point to the CFPB’s 2014 determination that Ace Cash Express, one of the largest payday lenders in the U.S., steered low-income borrowers, including those in the military, into a succession of financially damaging high-interest loans.

What do you think?

Should the U.S. roll back “gap insurance” proscriptions and supervisory lender examinations? Why or why not? Hit Take Action to tell your reps what you think, then share your thoughts below.

—Sara E. Murphy

(Photo Credit: U.S. Army photo by C. Todd Lopez / Public Domain)