CFPB Reinterprets Authority to Conduct MLA-Related Examinations

The CFPB issued an interpretive rule setting forth the basis for the agency's authority to examine financial institutions for conduct that violates the Military Lending Act ("MLA").

In the interpretive rule, the CFPB explained that it previously reviewed entities for MLA violations under the Consumer Financial Protection Act ("CFPA") from 2013 until 2018. In 2018, the CFPB discontinued its examination activity due to a change in the agency's legal interpretation as to the agency's authority to conduct these examinations. The CFPB is now returning to its original position asserting that the agency is authorized to conduct examinations by:

• Section 1024(b)(1)(C) of the CFPA, because conduct that violates the MLA (i) constitutes "risks to consumers" that the CFPB may detect and assess, (ii) can potentially overlap with violations of the Truth in Lending Act ("TILA") and (iii) could be prevented by the CFPB if detected during an examination; and

• Section 1025(b)(1)(C) of the CFPA, because MLA-related issues can be "associated" risks to consumers, because the activity of extending "consumer credit" under the MLA is a subset of the activity of extending "consumer credit" under the TILA.

The interpretive rule will go into effect upon its publication in the Federal Register.