The Consumer Financial Protection Bureau (CFPB) has determined active duty Reserve and National Guard members are not always receiving interest rate reductions through the Servicemembers Civil Relief Act (SCRA).
The CFPB indicated its research showed those service members are paying an extra $9 million in interest annually because of failure to receive the SCRA benefit providing service members on active duty the right to request interest rate reductions on outstanding loans during the time they are activated and for an additional year regarding mortgages.
“Our analysis suggests that members of the Reserves and the National Guard who serve in active-duty status are not receiving interest rate reductions on their loans pursuant to the law,” CFPB Director Rohit Chopra said. “Given rising interest rates, financial companies should take steps to ensure military family financial rights are respected.”
The CFPB maintains small fractions of activated Guard and Reserve service members receive interest rate reductions. Financial institutions can take steps to ensure those individuals can more easily assert their rights.
According to the CFPB, the SCRA provides legal and financial protections to aid active duty service members in focusing on their mission. The protections include the right to a reduced interest rate on any pre-service obligation to a maximum of 6 percent.
As a means of ensuring reserve component service members benefit from their right to an interest rate reduction, the CFPB has recommended, among other provisions, creditors apply SCRA interest rate reductions for all accounts held at an institution if a servicemember invokes their rights for a single account; creditors automatically apply SCRA rights; and development of comprehensive and periodic indicators of SCRA interest rate reduction utilization.