A federal financial watchdog program that protects troops against predatory lending schemes could be dismantled under controversial sweeping legislation up for a vote by the House on Thursday.
The Consumer Financial Protection Bureau, created by a 2010 financial reform and protection law known as "Dodd-Frank," would be overhauled and its power dramatically reduced by the Financial Choice Act, a sweeping piece of legislation aimed at shrinking federal financial regulations put in place by the Obama administration.
Critics of the bureau say it has too little oversight, with the power to make regulations and levy fines without congressional or White House approval. Supporters say it offers much-needed protections against predatory financial practices while punishing those who behave badly through civil suits. The bureau partners with the Justice Department to prosecute offenders.
One CFPB program is specifically dedicated to protecting troops. Once led by Holly Petraeus, the bureau's military affairs department had fielded almost 75,000 complaints about predatory financial practices from troops, veterans and their families as of early April, a CFPB report says, resulting in new regulations expanding the types of credit products covered under a pre-existing rate cap, among other changes.
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The CFPB has also played a major role in providing restitution and help to troops taken advantage of by illegal financial practices.
In 2016, Navy Federal Credit Union agreed to pay $28.5 million in fees and restitution as part of a settlement with the Consumer Financial Protection Bureau for illegally blocking customers from their accounts while making false debt collection threats.
A separate Justice Department settlement with USA Discounters, which was found by CFPB to exploit service members through a fee scam and deceptive marketing, reached a $96 million debt forgiveness settlement with troops in 49 states and Washington, D.C.
If passed by the House and Senate, the Financial Choice Act would reorganize the CFPB as the Consumer Law Enforcement Agency, remove its power to prosecute companies and allow Congress to kill any financial rules made by the agency.
It is unclear whether the bureau's rules specific to service members, such as the rate cap expansion change, would be eliminated should the law pass.
In a statement released Wednesday, Rep. Jeb Hensarling, a Texas Republican who sponsored the new legislation and chairs the House Financial Services Committee, pledged to uphold existing troop financial protection laws, such as the Military Lending Act or the Service Member's Civil Relief Act "written by Congress," but stopped short of pledging to leave untouched the CFPB's troop-specific regulations.
"The Financial Choice Act … re-establishes the CFPB as a civil enforcement agency so it is fully focused on enforcing the consumer financial protection laws written by Congress, especially those designed to protect our veterans, service members, their family members and dependents, and other consumers," Hensarling said in his statement.
"The Financial Choice Act does not weaken the laws that specifically protect active-duty and retired members of our armed forces," he added.
But the Veterans of Foreign Wars said in a statement that it is looking for Congress to leave untouched the CFPB's ability to protect troops and veterans.
"The Veterans of Foreign Wars of the U.S. says Congress must ensure the proposed Consumer Law Enforcement Agency retains the CFPB's authority to protect our nation's service members and veterans from predatory financial practices," VFW spokesman Joe Davis said in a statement.
Before becoming law, the legislation must first pass the House and Senate and be signed by the president. Although it is expected to pass the House on Thursday without issue, its fate in the Senate remains uncertain.
-- Amy Bushatz can be reached at email@example.com.