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On March 10, 2025, the CFPB informed the U.S. District Court for the Northern District of Texas that it will proceed with litigation against a short-term installment lender and its subsidiary for alleged violations of the Military Lending Act (MLA).The lawsuit alleges that the lender violated the MLA and a 2013 administrative consent order by issuing loans to military service members with interest rates exceeding the MLA's 36% cap, included mandatory arbitration provisions in loan contracts, and failed to provide required disclosures. The CFPB further asserts that these practices continued despite a prior CFPB enforcement order against the lender's predecessor.
Specifically, the lawsuit alleges that the lender:
- Charged interest rates exceeding the MLA's 36% cap. Between June 2017 and May 2021, the lender allegedly issued over 3,600 pawn loans to more than 1,000 military borrowers with APRs frequently exceeding 200%.
- Included mandatory arbitration clauses in loan agreements. The Bureau asserts that loan contracts required military borrowers to submit to arbitration in the event of a dispute, despite the MLA's explicit prohibition on such provisions.
- Failed to provide necessary MLA disclosures. The lender allegedly did not furnish covered borrowers with necessary loan disclosures, including the Military Annual Percentage Rate (MAPR), before or at the time of transaction.
- Violated a prior CFPB enforcement order. The lender was subject to a 2013 CFPB consent order barring it and its successors from further MLA violations.The Bureau contends that the lender ignored and continued to engage in prohibited lending practices.
Putting It Into Practice: The CFPB's decision marks the second MLA enforcement action it decided to move forward with this month (previously discussed here).This signals that MLA enforcement remains a priority under the new administration.Lenders offering credit to military service members should expect continued scrutiny and ensure compliance with MLA requirements.
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