WASHINGTON– Auto finance companies are being reminded of their responsibilities to recognize “important legal protections” for military families under the Servicemembers Civil Rights Act (SCRA) in a new joint letter issued by the Department of Justice and the Consumer Financial Protection Bureau (CFPB).
In issuing the letter, the CFPB said recent 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,” the CFPB said.
It further noted its Spring 2022 Supervisory Highlights also uncovered unfair acts or practices, prohibited by the Consumer Financial Protection Act, in the auto servicing industry.
Key Provisions
According to the DoJ and the CFPB, the letter is designed to ensure that auto finance companies are aware of key provisions within the SCRA, including:
- Wrongful vehicle repossessions. The SCRA prohibits an auto finance company from repossessing a vehicle during the borrower’s military service without a court order, even if the borrower financed or leased the vehicle prior to entering military service.
- Failure to terminate vehicle leases without penalty. The SCRA allows servicemembers to terminate motor vehicle leases early and without penalty after entering military service or receiving qualifying military orders for a permanent change of station or deployment.