A powerful, long-serving Republican congressman blocked a federal crackdown on predatory lenders targeting military members while his wife was working for a firm that lobbied for one of the nation’s top lender trade associations, according to financial disclosures.
Rep. Mac Thornberry of Texas was chairman of the House Armed Services Committee when he pushed to delay new restrictions under the Military Lending Act that sought to protect military service members from predatory lending practices. A study conducted by the Department of Defense found that 11% of military members had been subjected to predatory loans, leading to personnel discharges at a cost to the department of $14 million a year.
Under the rules, lenders, banks, and credit card companies were required to cap interest rates at 36% annually and are prohibited from providing continual payday loans or requiring service members to submit to mandatory arbitration rather than seeking a resolution in court.
The restrictions, which were proposed by Barack Obama and backed by veterans advocates and consumer groups, were designed to combat predatory lending behavior and payday lenders targeting military personnel.
At the time, Thornberry’s wife, Sally, was working for Canfield & Associates, a lobbying firm that oversees and lobbies for the Consumer Mortgage Coalition, a major trade association for the mortgage lending industry, according to financial disclosure reports. The reports indicate that she worked at the firm in 2015 and 2016.
The Consumer Mortgage Coalition lobbied on a number of loan-related issues, including provisions related to the Mortgage Choice Act and revisions to the Truth in Lending Act, according to lobbying disclosure reports. Although the restrictions on high-interest military loans did not include residential mortgage loans, the regulations applied to lending companies that provided mortgages in addition to other forms of credit, including members of the Consumer Mortgage Coalition.
Coalition members included Wells Fargo Home Mortgage, Chase Home Lending, CitiMortgage, and other major banks, according to the mortgage trade outlet Origination News. Wells Fargo, JPMorgan Chase, and Citibank were all subject to military lending restrictions. Wells Fargo paid out an $87 million settlement for violating a precursor to the Military Lending Act, the Servicemembers Civil Relief Act, in 2012 and received a $20 million penalty for violations in 2016. Wells Fargo also ended its payday loan program in 2014 amid pressure from new federal loan regulations.
In October 2016, Sen. Sherrod Brown of Ohio wrote a letter to Wells Fargo saying he was “concerned about potential compliance issues related to the Military Lending Act” at the bank, including the rules that Thornberry had pushed to delay.
Thornberry backed a delay of the rules as part of an amendment in the 2016 National Defense Authorization Act. He argued that the rules would require lenders to access a government database of military members that might not run properly. He also said the government should focus on educating service members about finance rather than increasing regulations.
“If you look outside military posts, there’s a variety of different kinds of businesses,” Thornberry told the Texas Tribune at the time. “And so I do think it’s a question: How much do we want to put in federal law, about eating fast food? Or various other kinds of things?”
The outlet also reported that Thornberry had raised over $33,000 that year from an executive at the American Financial Services Association, one of the main groups that was lobbying to delay the regulations.
The National Legal and Policy Center, a government watchdog group that has been investigating Thornberry’s financial ties, said his wife’s work for a lobbying group that had interests before his committee raises questions about conflicts of interest.
“Sometimes things are exactly as they appear, and the appearances here are not good for Rep. Thornberry,” said Tom Anderson, director of NLPC’s government integrity project. “If you are sitting atop the Armed Services Committee, you should be careful about your relationships with special interests. He’s apparently made them part of his family.”
Previously, the Consumer Mortgage Coalition had opposed government crackdowns on “predatory lenders.” The organization argued against new laws against abusive loans in testimony to the Senate Special Committee on Aging in 2004, saying that predatory lending “is hard to define,” current laws are not actively enforced, and the focus should be on providing the public with adequate financial education rather than additional regulations.
“New laws are not needed to address these problems. Rather, there must be a renewed emphasis on devoting the necessary resources to enforce existing law,” the organization said in a written statement to the committee.
A representative for Thornberry said the congressman’s wife did not lobby the congressman on this or any other issue. He said her work for the lobbying group was related to freelance writing on postal services.
