SAN ANTONIO -(Dow Jones)- Reports that J.P. Morgan Chase & Co. (JPM) has overcharged military families for mortgages "emphasizes why we need a consumer protection bureau," White House adviser Elizabeth Warren said Tuesday at San Antonio's Lackland Air Force Base.
Warren, who is in charge of setting up the new Consumer Financial Protection Bureau, visited the base to discuss financial issues with members of the military along with the bureau's new, high-profile military liaison, Holly Petraeus.
The meeting comes amid news that J.P. Morgan overcharged thousands of families on their mortgages. J.P. Morgan said it also foreclosed on 14 active-service military families, according to an ongoing internal bank review.
The bank said it made mistakes when accounting for active military service under the Servicemembers Civil Relief Act, which says active-duty military families' interest rates on homes can be no more than 6%, and they aren't subject to the delinquency process, including foreclosures.
"We made mistakes here and we are fixing them," the bank said in a statement. It added that it is in the process of refunding about $2 million to more than 4,000 families that were overcharged.
Meanwhile, Sen. Jack Reed (D., R.I) said Tuesday he asked Attorney General Eric Holder to examine the issue.
"Soldiers who are fighting on the front lines to protect our country shouldn't have to needlessly fight with banks to protect their homes," Reed said in a statement. "I am concerned other banks may also be wrongly overcharging our troops or taking unfair advantage of their situation."
Warren said in an interview that there should have been monitoring early on to ensure that mortgage lenders were complying with the law.
"That would have caught a problem like this," she said, adding that the agency will have tools to make serious changes.
Petraeus said the J.P. Morgan incident isn't the first time she has heard of the Servicemembers Civil Relief Act not being properly applied.
"Financial institutions need to educate their administrators on the law," she said.
Earlier in the day, Warren and Petraeus heard from financial counselors at Lackland, who told them that payday loans are a significant problem for service members because they push members of the military into debt traps that affect their ability to serve.
Some counselors said loopholes in federal law enable companies to charge military families excessive interest rates despite a law that caps rates for consumer credit to active-duty military personnel at 36%. That is "certainly something we're going to be investigating," Warren told reporters after the meeting.
She said the bureau's first step will be to make sure laws currently on the books are fully enforced. Then, the bureau can see if there are still significant problems that need to be addressed, she said.
Warren's trip to the military base is expected to be the first of many as the bureau prepares for a July 21 launch. Warren said they wanted to meet with military families early on because "we think military families are critical to our nation."
In their meeting with military families, Warren, Petraeus and Rep. Charles Gonzalez (D-Texas) noted that service members face unique challenges.
"You are deployed. You're transferred. It's a very unique life," Gonzalez said. But some of these challenges can be perplexing, he said.
"This is information-gathering. We're listening," said Gonzalez.
Similarly, Petraeus stressed that she wants to hear from service members on a continual basis.
"I was very happy to learn that the military community was not overlooked when this groundbreaking consumer agency was created," Petraeus said. "I pledge to do everything in my power to ensure that the Office of Servicemember Affairs serves you and your families well."
--Alan Zibel and David Benoit contributed to this story.
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