I write often about the Servicemembers Civil Relief Act (SCRA). It should come as no surprise to consumer finance companies that men and women joining the armed forces have the right to an adjustment of an interest rate so as not to exceed 6% on a financial obligation incurred prior to military service. See for example, Back to Basics, Continued—Servicemembers Civil Relief Act. As interest rates increase this right becomes increasingly valuable to our Servicemembers. 

The CFPB has stated that its analysis suggests that members of the Reserves and National Guard who serve on active-duty status are not receiving interest rate reductions on their loans. Specifically, the CFPB complains that financial institutions are requiring the Servicemembers to jump through too many hoops to access this right to interest rate reduction.

In its December 7, 2022 press release, the Bureau acknowledges that the law does provide proactive notifications from Servicemembers to access the rights under the SCRA. However, the CFPB blatantly attacks creditors who insist on following the law’s structured requirements, stating: “However, creditors could just as easily access a Department of Defense system [the Defense Manpower Data Center SCRA website] that checks any borrower for active-duty status.” 

The CFPB goes on to recommend that creditors do just that—apply the SCRA interest rate reductions automatically without placing any burden on the Servicemember to alert the creditor and explain how military service negatively impacts his or her ability to repay.

Adding insult to injury, the CFPB actually invites employees of creditors to be whistleblowers: “Employees who believe their companies have violated federal consumer financial protection laws are encouraged to send information about what they know to whistleblower@cfpb.gov. To learn more about reporting potential industry misconduct, visit the CFPB’s website. “

I don’t make this stuff up! You can read it for yourself at CFPB Finds Members of the Reserves and National Guard Paying Millions of Dollars in Extra Interest Each Year | Consumer Financial Protection Bureau (consumerfinance.gov).

Please Note: This is the two hundred-forty-first blog in a series of< Back to Basics blogs, in which relevant and resourceful information can be easily accessed by clicking Dentons - Consumer Finance Report.