CFPB Report Finds Only Small Fractions of Activated Guard and Reserve Servicemembers Receive SCRA Interest Rate Reductions

On December 7, the Consumer Financial Protection Bureau (CFPB) released a report entitled Protecting Those Who Protect Us. The report sought to quantify, for the first time, the use of the Servicemembers Civil Relief Act (SCRA) interest rate reduction benefit. According to the CFPB’s research, between 2007 and 2018, fewer than 10% of eligible auto loans and 6% of personal loans received a reduced interest rate. Additionally, members of the reserve component also infrequently benefit from interest rate reductions for credit cards and mortgage loans. The report identified several strategies (previously “codified” via consent orders) to increase servicemember access to SCRA protections, including automatically applying interest rate reductions and applying reductions for all accounts held at an institution if a servicemember invokes protections for a single account.

The SCRA applies to active-duty members of the Army, Marine Corps, Navy, Air Force, Space Force, and Coast Guard as well as reservists or members of the National Guard serving for more than 30 consecutive days for the purpose of responding to a national emergency. The law also applies to active duty commissioned officers of the Public Health Service or the National Oceanic and Atmospheric Administration. The SCRA provides multiple legal and financial protections to active duty servicemembers, including: (1) the ability to reduce the interest rate on any pre-service obligations or liabilities to a maximum of 6 percent; (2) protections against repossession of certain property, including motor vehicles, without a court order; (3) protections against default judgments in civil cases; (4) protections against certain home foreclosures without a court order; and (5) the ability to terminate certain residential housing and automobile leases early without penalty.

The CFPB’s report focused only on the interest rate reduction benefit and protection against repossession. To receive the interest rate reduction, a servicemember must notify their lender in writing with a copy of their orders to active-duty service or any other appropriate indicator of military service. Creditors may also proactively grant the interest rate reduction by retrieving information from the Defense Manpower Data Center SCRA website to determine active-duty status in lieu of written notification.