Schumer: Veterans need protection from predatory lenders

On Monday, as the nation honored its veterans, Sen. Chuck Schumer pressed a federal agency to protect service members by policing lenders who target them with exorbitant fees and rates. 

The Consumer Financial Protection Bureau plans to stop regularly checking banks and other lenders on their compliance with the Military Lending Act, enacted in 2006 against triple-digit interest and other predatory practices  — a move that Long Island veterans advocates denounced Monday outside a Freeport home whose owner, now an Army National Guard reservist, had been slammed with a surprise $25,000 in closing fees.

"It would be a giant disgrace for the federal government to turn the other cheek when predatory lending rears its ugly head, but that's what's happened," said Schumer (D-N.Y.), the Senate minority leader. "The feds need to hook the loan sharks targeting New York service members and not allow them to go on a feeding frenzy." 

The agency's move has set off alarms nationwide, and Nassau County veterans officials at the  news conference said they're worried because more service members have been house-hunting as they return from tours abroad. 

Sgt. Kerry-Ann Haughton, who served three naval tours off Afghanistan and Iraq, said new closing fees were tacked on days before she was to close on her four-bedroom home. She figured it was part of the deal, but her $25,000 closing costs were negotiated down to $5,000 by the Hauppauge-based VetsEDU, a national real estate advocacy group for veterans.

"I didn't realize something was really wrong," said Haughton, 34.

A representative of the bureau did not respond to requests for comment.

Under President Barack Obama and in the aftermath of the mortgage market collapse, the agency audited banks and lenders on an array of factors, including compliance with the Military Lending Act, which caps interest at 36 percent. 

But under President Donald Trump, the bureau's acting director, Mick Mulvaney, has said the act does not require the bureau to proactively monitor lenders' compliance. He has said borrowers can file complaints with the bureau, which would investigate.

Since 2011, the bureau has handled more than 72,000 complaints from service members and saved them more than $130 million, according to Schumer.

Following news of the bureau's planned change in policy, Schumer and other senators protested in an August letter to Mulvaney.  On Monday, Schumer said he also wants to stave off any efforts to weaken the Military Lending Act and fund financial education programs for veterans.

Gary Port, chairman of the Nassau County Bar Association's veterans law committee, said predatory lending has been a longtime problem among service members and that he had to help many victims when he was a judge advocate general in the Navy.

Predatory lenders see them as "cows to be milked," said Port, also co-director of the Robert W. Entenmann Veterans Law Clinic at Hofstra University.

"This is outrageous," he said. "These people are defending you."