The Justice Department and the Consumer Financial Protection Bureau (CFPB) have jointly issued a letter to financial services providers, emphasizing their obligation to uphold interest rate protections for servicemembers, recent veterans, and their spouses under the Servicemembers Civil Relief Act (SCRA).
The SCRA provides servicemembers with additional rights and protections due to the unique financial challenges that arise from military service. One key provision limits the interest rates that banks, credit card companies, and other financial services providers can charge on certain pre-service financial obligations to no more than 6% per year, including most fees.
"Servicemembers make great sacrifices to serve our nation and protect our democracy," stated Assistant Attorney General Kristen Clarke of the Justice Department’s Civil Rights Division. "Financial services providers must ensure that servicemembers are afforded their rights and benefits under the law."
CFPB Director Rohit Chopra added, "Many military families have been hit hard by high interest rates on credit cards, mortgages, and auto loans, even though they are entitled to an interest rate cap. Financial firms shouldn’t be price gouging those who serve in uniform."
Recent CFPB reports highlight rising interest rates in both credit card and mortgage markets. The CFPB's 2022 analysis found that less than 10% of eligible auto loans and 6% of personal loans for activated members of the National Guard and Reserves received interest rate reductions. This has resulted in nearly $10 million annually in estimated lost savings. With current car loan and mortgage rates exceeding 6% for many borrowers, more servicemembers could benefit from a reduction now compared to previous years.
The joint letter aims to ensure that financial services providers recognize the SCRA provision protecting servicemembers against violations of interest rate benefits. If servicemembers properly request it, creditors must forgive any interest above 6%. The letter also suggests that providers automatically apply this cap to all eligible accounts if a servicemember invokes protections for one account.
The Justice Department’s Servicemembers and Veterans Initiative coordinates federal resources to create a legal support network focused on serving servicemembers, veterans, and their families. Since 2011, it has secured over $481 million in monetary relief for more than 147,000 servicemembers through SCRA enforcement.
Servicemembers covered by this law may be eligible for military legal assistance through local offices or can request Justice Department review by submitting a complaint at civilrights.justice.gov/report/.
The CFPB offers educational resources to military families and monitors complaints related to consumer protection within the military community. It enforces the Military Lending Act and can take action against unfair practices related to consumer financial products or services under the Consumer Financial Protection Act.
Consumers facing issues with interest rates can submit complaints online or call (855) 411-CFPB (2372). The CFPB also encourages whistleblowers with information about potential violations of federal consumer protection laws by their employers to contact them at whistleblower@cfpb.gov.
