Military Members Often Wrongly Charged Extra Interest

The Servicemembers Civil Relief Act (SCRA), which was passed in 2003, entitles all active duty military members to reduced interest rates on debt and pre-service charge up to 6%.

But according to a recent report by the Consumer Financial Protection Bureau (CFPB), very few eligible members received this benefit, resulting in more than $100 million in past-due interest savings over 11 years.

Key Takeaways

  • The CFPB found that most military personnel did not benefit from the lower interest rates offered by the SCRA.
  • The federal agency looked at data from 2007 to 2018 for credit cards, auto loans, personal loans and mortgages, mostly for the U.S. Army Reserve and the National Guard.
  • The CFPB also made some recommendations to increase the benefits provided by the SCRA to the military.

SCRA’s financial security is unaffected

The financial and legal safeguards under the SCRA are designed to enable members of the armed forces to devote all their energies and focus on the national security needs. One of the provisions of the law entitles eligible employees to receive reduced interest rates on pre-employment obligations, such as credit cards, car loans, mortgages, etc. student loans, personal loans and mortgages.

But in a recent investigation by the CFPB, the federal agency found that covered troops are not receiving the promised benefits. The, which includes data from 2007 to 2018 for the US Army Reserve and National Guard, found that 9.5% of auto loans and 5.9% on qualified personal loans, interest rates have decreased during this time.

Between these two types of loans alone, the federal agency estimates that service workers paid about $100 million in additional interest charges that they did not have to pay.

Service members with longer activation periods – typically a year or more – may receive lower interest rates, but even then, the potential for personal and auto loans is still there. below 16%. Credit card and loan data are too complex to provide similar estimates.

The CFPB has not said why service members are not receiving SCRA benefits, but it may be due to the cumbersome application process, which requires service members to submit applications with copies of the same as placing them. or letter of awareness to his creditor by certified mail.

The CFPB provides a suitable solution

Along with its analysis, the CFPB provides three steps to increase the use of interest rate reduction provisions under the SCRA, including:

  • Apply the interest rate reduction to all accounts held at an institution if a service member requests a reduction for a single account at that institution.
  • Find out how to automatically apply interest rate reductions to limit violations during the application process.
  • Develop comprehensive and periodic indicators of the use of SCRA benefits to inform and evaluate future efforts to strengthen regulatory protections.


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