There was a study published by the Consumer Financial Protection Bureau (CFPB) a few months ago that claimed many active-duty servicemembers who qualified for interest rate reductions under the Servicemembers Civil Relief Act (SCRA) were not actually receiving those reductions from their creditors.
The CFPB’s research paper examined data and outlined how it reached its findings. However, the CFPB’s press release headline (“CFPB Finds Members of the Reserves and National Guard Paying Millions of Dollars in Extra Interest Each Year”) used exaggerated language to make its point. The purpose of the paper was to identify ways that creditors can prevent servicemembers from missing out on essential benefits.
To provide some context, the SCRA allows servicemembers up to 180 days after their active duty ends to provide a creditor with a copy of their orders or other indication of military service. If a service member doesn’t provide written notice and evidence of his or her orders, creditors can use data from the Defense Manpower Data Center (DMDC) to validate the service member’s active duty status; creditors are afforded a “safe harbor” if the DMDC information is erroneous. Creditors are obligated to pay DMDC benefits even if the DMDC data is erroneous so long as the servicemember gives written notice and directives.
With regard to the SCRA’s interest rate reduction provision, the onus is squarely on the servicemember to notify creditors of his or her call to active duty. However, with regard to repossession protection, the onus is squarely on the creditor to ensure that a judicial process is followed rather than self-help.
In light of this, the CFPB’s paper suggested that servicemembers are not always receiving their entitled interest rate reduction benefits. The CFPB detailed its assumptions, and the statistical model used to reach its conclusions, and outlined the limitations of its data, such as potentially inaccurate or incomplete consumer data reported by creditors and speculative interest rate information.
The paper also proposed that creditors take the following affirmative actions to reduce the burden of servicemembers being required to inform creditors of their deployment status:
- All of a servicemember’s accounts with a given creditor must be treated as if they were covered by the SCRA if the servicemember invokes the SCRA’s protections on a single account.
- Determine methods by which the rate cut provided by the SCRA can be applied mechanically.
- Create metrics to track how often SCRA services are actually used.
These recommendations, if implemented, can ensure that servicemembers are provided the necessary protections under the SCRA, thereby preventing unnecessary stress and allowing them to focus on their service.
The headline used by the CFPB might appear as clickbait, but it’s best to perceive the recommendations as well-intentioned. Creditors applying for benefits automatically to all accounts held by a servicemember and conducting regular proactive SCRA audits across their entire consumer portfolio could prevent illicit repossessions and identify opportunities to offer valuable interest rate reductions, thereby making it easier for servicemembers on active duty to manage their payments.
Keeping in mind that the goal of the SCRA is to ensure that serving members’ financial and legal needs are met so that they are not distracted from their mission, it is obvious that the time and effort spent on adopting these recommendations is well spent. This not only displays gratitude for our military members but also guarantees that they are receiving the full benefits of the SCRA.
Media Contact:
Company name- Servicemembers Civil Relief Act Centralized Verification Service
Contact Name- Roy L. Kaufmann
Tel- +18457302251
Email- info@servicememberscivilreliefact.com
Country- United States
City- Washington, DC
