Bureau joins with Department of Justice in statement on protections for military servicemembers
The Consumer Financial Protection Bureau (CFPB) joined with the U.S. Department of Justice (DOJ) to issue a statement of warning to auto finance companies relative to special protections provided to members of the military when it comes to consumer finance. The protections are a part of the Servicemembers Civil Relief Act (SCRA), which provides a means of recovery should servicemembers face malfeasance in the consumer finance space. This includes areas like borrowing for a home mortgage or the purchase of a car.
The CFPB issued a statement saying the letter was intended to advise auto finance companies of their responsibilities when lending to military servicemembers.
“Auto finance companies that play by the rules should not be disadvantaged by competitors that violate the legal rights of military families,” said CFPB Director Rohit Chopra. “The CFPB is closely monitoring the auto finance industry to ensure that servicemembers and their families are being treated fairly.”
The joint letter to auto finance companies highlighted several key protections provided by the SCRA, including:
- Wrongful vehicle repossessions: The SCRA prohibits an auto finance company from repossessing a vehicle during the borrower’s military service without a court order, even if the borrower financed or leased the vehicle prior to entering military service.
- Failure to terminate vehicle leases without penalty: The SCRA allows servicemembers to terminate motor vehicle leases early and without penalty after entering military service or receiving qualifying military orders for a permanent change of station or deployment.
- Violations of auto loan interest rate benefits: The SCRA also limits interest rates on loans incurred prior to military service to no more than 6% per year, including most fees. If servicemembers make a proper request, a creditor must forgive and not defer any interest greater than 6%.