CFPB and Justice Department Caution Auto Finance Companies about Servicemember Protections

The Department of Justice and the Consumer Financial Protection Bureau issued a joint letter reminding auto finance companies of their responsibilities to recognize important legal protections for military families under the Servicemembers Civil Relief Act (SCRA). While servicemembers have the same rights as non-military borrowers, the SCRA provides additional rights to protect servicemembers and their families against unique financial challenges.

“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 Civil Rights Division is entrusted with the responsibility of ensuring that the rights of the brave men and women of our Nation’s armed forces are safeguarded from discrimination and unfair treatment,” said Assistant Attorney General Kristen Clarke. “We work every day to ensure that these rights, including those related to auto financing, are protected through litigation, outreach, and policy development.”

Recent CFPB research has shown that  servicemembers tend to carry more auto loan debt at younger ages than their civilian counterparts, largely due to the need for transportation while living on a military base. They’re also commonly the target of unfair or predatory practices including costly loans and expensive contracts because of the financial inexperience of many entering the service as young adults, combined with their steady paychecks and ability to structure payments through the military allotment system. CFPB’s  Spring 2022 Supervisory Highlights also uncovered unfair acts or practices, prohibited by the Consumer Financial Protection Act, in the auto servicing industry.

For the full article, please visit CFPB.