Hollister K. Petraeus
Team Lead, Office of Servicemember Affairs
Consumer Financial Protection Bureau Implementation Team
U.S. Department of the Treasury
February 9, 2011
House Committee on Veterans Affairs
Chairman Miller, Representative Filner, and distinguished members of the Committee: thank you for the opportunity to speak with you today about the Servicemembers Civil Relief Act as well as the Consumer Financial Protection Bureau (CFPB) Implementation Team’s work to establish the Office of Servicemember Affairs (OSA). First of all, I’d like to thank this Committee for its continuing efforts to protect servicemembers, veterans, and their families from predatory financial practices. As many of you know, I’ve been a member of the military community my entire life, and I feel that it’s very important that our military has strong advocates working on its behalf. And it’s my intent that the Office of Servicemember Affairs be one of those strong advocates, educating and looking out for military personnel and their families.
First, I’d like to tell you a bit about my background, especially my work on military financial education issues during the last six years. Next, I’ll provide some background on the Consumer Financial Protection Bureau and the Office of Servicemember Affairs (OSA). Finally, I’ll touch on the alleged violations of the Servicemembers Civil Relief Act (SCRA) that are the subject of today’s hearing.
I come from a military family, one that has a tradition of service going back to the Revolutionary War. My father served in the Army for over 36 years, fighting in both World War II and Vietnam. Two of my brothers also served in Vietnam, and, of course, my husband is currently serving. And I’m a military mom, as well. The military is in many ways a separate community in our nation, and it’s one that I have the privilege to know very well.
The last time I testified before Congress was over six years ago, when I spoke about deployment-related issues at a joint hearing of two Senate subcommittees: the Subcommittee on Children and Families from the Committee on Health, Education, Labor & Pensions, and the Subcommittee on Personnel from the Committee on Armed Services. At that time, my husband had just begun the second of three deployments to Iraq and I was a longtime volunteer in the military community. As a volunteer, I had the opportunity to serve as a senior Family Readiness Group advisor during deployment and to work with local, state and national legislators on issues affecting Army families. Five months after that testimony, I became the Director of BBB Military Line, a program of the Council of Better Business Bureaus (BBB) providing consumer education and advocacy for servicemembers and their families – a position that I held for six years. In that role, I oversaw a national program that worked with the Department of Defense (DoD) as a partner in the DoD Financial Readiness Campaign and fostered outreach from the 120 local Better Business Bureaus to military communities across the United States.
While with the BBB, I made on-site visits to many military installations, learning about the consumer issues that impacted them, giving presentations on consumer scams, and working to establish local BBB-military relationships. I guided development of teen and adult financial education curricula taught to over 10,000 individuals in military communities around the United States, and wrote a monthly consumer newsletter addressing issues of interest to the military.
Last fall, I was one of a number of people who offered advice to Professor Warren when she first began her task of setting up the Consumer Financial Protection Bureau. And when she offered me the opportunity to be in on the ground floor of building the Office of Servicemember Affairs, I couldn’t resist this new opportunity to serve as an advocate for military personnel and their families.
Functions and Structure of the CFPB
The Dodd-Frank Wall Street Reform and Consumer Protection Act (Dodd-Frank Act) which was signed into law on July 21, 2010, established the CFPB as an independent bureau within the Federal Reserve System and charged it with ensuring that consumers have the information they need to make financial decisions that are best for them and their families. The CFPB will work to promote fairness, transparency, and competition in the markets for mortgages, credit cards, and other consumer financial products and services. The CFPB will set – and enforce – clear, consistent rules that allow banks and other consumer financial service providers to compete on a level playing field and that allow consumers to see clearly the costs and features of financial products and services.
Under the Dodd-Frank Act, the Secretary of the Treasury has responsibility for standing up the CFPB until a Director of the CFPB is in place. In September, the Secretary asked Elizabeth Warren to serve as a Special Advisor leading the effort to stand up the CFPB. The CFPB implementation team, currently housed within the Treasury Department, is hard at work putting in place the building blocks for the CFPB.
The CFPB Implementation Team is divided into several teams that are standing up the various functions of the CFPB, including: Bank Supervision, Nonbank Supervision, Enforcement, Financial Education, Rulemaking, Consumer Response, Fair Lending, Research and Markets, etc. On July 21st of this year, many consumer financial protection functions that are currently with other agencies will transfer to the CFPB–I have to point out, however, that responsibilities relating to the Servicemembers Civil Relief Act, the focus of this hearing, will remain with the prudential regulators and the Justice Department. Eventually, the CFPB will grow into a fully operational financial regulator and supervisor, and it will be the primary place where members of the public – including servicemembers – can come with questions and complaints about consumer financial products and services.
Functions and Structure of the Office of Servicemember Affairs
Professor Warren asked me to join the implementation team at the end of last year. I started a little less than a month ago, and we are hard at work building the Office of Servicemember Affairs.
The Dodd-Frank Act authorizes the OSA to work in partnership with the Pentagon to see that military personnel and their families receive strong financial education, to monitor their complaints about consumer financial products and services – and responses to those complaints – and to coordinate efforts by federal and state agencies to improve consumer financial protection measures for military families. We are authorized to enter into agreements with the Department of Defense to carry out OSA’s work and to make sure that we achieve those goals.
Within the CFPB, our job is to make sure that every division of the CFPB understands the unique military community and the financial issues that impact it. I plan to work with our examiners to ensure they are current on military-specific issues, to encourage our enforcement team to take action against financial providers who break the law to harm servicemembers and to work with the consumer response unit to be sure that it is attuned to the military community and responsive to its concerns. We also plan to work closely with the consumer financial education team at the CFPB. History has shown us that best practices developed in support of the military can translate to the larger US community – and that the military can be a great test bed for innovative financial education products that could have an application to the population at large.
According to our current draft organizational chart, the Office of Servicemember Affairs will eventually fit under the Associate Director for Education and Engagement, along with financial education and other offices that focus on particular segments of the population. Although education and engagement will be our primary responsibilities, our reach will go beyond our box on the organization chart; the goal is for the OSA to work closely with all parts of the CFPB to make sure that they keep the needs of the military community in mind in all of their work.
Right now we are focused on planning and scheduling visits to military bases and other meetings that will help us identify the problems and determine where we can make the biggest difference. I have already met with senior DoD officials, including Robert Gordon, the Deputy Assistant Secretary of Defense for Military Community and Family Policy. It’s clear to me that the people at the Pentagon are very supportive of our mission, and we are working closely with them to plan our future activities. In addition, I have met with senior staff from the Department of Justice’s Civil Rights Division, headed by Assistant Attorney General Tom Perez. The Justice Department is also supportive of our mission and eager to work with the CFPB to protect the rights of servicemembers. I was pleased to hear about the scope of DOJ’s enforcement activities on behalf of servicemembers, which includes authorized lawsuits against 3 nationwide lenders and several active investigations involving both foreclosures issues and failure to lower the interest rate to 6%. We are planning to coordinate closely with DOJ in light of its enforcement responsibilities under the SCRA.
This past Tuesday, I sent a letter to the CEOs of the 25 largest banks that provide mortgage servicing. This was prompted by the recent news reports alleging that major financial institutions had violated the Servicemembers Civil Relief Act, which provides financial protections for our military. I urged the CEOs to take steps to ensure that their institutions are in compliance with the law.
We’ve already started a conversation with the military community. Professor Warren and I have been to Joint Base San Antonio, where we had two roundtable discussions. The first was with military service providers, including lawyers, financial counselors, mental health professionals and chaplains, as well as the base’s leadership. We asked questions about what scams and other financial problems these service providers were seeing, and how they thought those financial problems might be dealt with. The second roundtable was with military personnel and spouses from the Air Force, Army and Navy. They felt strongly about the need for mandatory financial training, not just in basic training, but on a continuing basis. The military spouses in the room also brought up the challenges of deployment for dual-career couples, and the difficulties and temporary loss of income when moving a spouse’s civilian career job, as well as the basic financial strains of frequent moves. I could certainly relate to that, as I have moved 23 times in 36 years of marriage! We plan to do more roundtables, and have a tentative travel schedule mapped out through the spring that includes about one base visit per month.
Servicemembers Civil Relief Act
Protecting our servicemembers from suffering devastating financial repercussions for answering the call to service is not only the right thing to do – it is also important to our national security. Military personnel who are distracted by financial problems cannot do their jobs to the best of their abilities. In fact, hundreds of people in the military have their essential security clearances revoked each year due to financial problems, which then means they can’t do the job they were trained for. A recent Department of Defense survey found that servicemembers consider their finances to be the second largest source of stress in their lives, behind career concerns but ahead of deployments, health, family, and war.
The SCRA provides important safeguards for our military families who do so much for our country. It protects military personnel who are called to active duty by lowering the interest rate to 6 percent on certain debts incurred before entering active duty, including mortgage and credit card loans. Additionally, the SCRA provides certain protections from foreclosure for the home of a servicemember on active duty.
In light of the importance of protecting our servicemembers, I was dismayed to learn about the recent allegations of mortgage-related violations of SCRA. I hope that the recent attention to this issue will cause all lenders to take steps to educate their employees about the financial protections that the SCRA provides and to take appropriate proactive steps to ensure compliance. This law was put in place to enable our soldiers to focus on their jobs, and it’s important that it be adhered to. Servicemembers should not have to struggle to get the provisions that are due to them under law. A National Guard wife once told me that her husband had been activated three times, and each time she had had to fight with their bank for months to get the SCRA applied.
As you know, a foreclosure is devastating for any American family to experience, but it can be especially painful for military families. Both the family back home and the servicemember abroad, who feels helpless to take action to prevent the foreclosure, are put in a terrible situation. That’s why it is so important that servicemembers receive all the protections afforded to them under the SCRA. Again, I would hope that the recent problems will be a wake-up call for all banks and other financial companies to be especially careful to comply with the SCRA.
Last month, I attended the White House announcement of the “Strengthening Our Military Families” initiative. The President, First Lady and Dr. Biden all spoke at that event, affirming their commitment to military families, and almost the entire cabinet was in attendance as well. There is currently a very positive feeling in this country towards the service and sacrifice of military families, and a desire to support them. One way to help is to enforce the laws that are already on the books to protect them, and to hold to account those who ignore them. Another is to write new rules when needed. It’s also important to educate the military about their financial protections and about best financial practices. That will all be a big part of the mission of the CFPB and the Office of Servicemember Affairs.