of Military Personal Relief Act (SCRA) was passed in 2003 and gives all active duty military service members the right to reduce interest rates on pre-service obligations and debts by up to 6%.
But a recent report from the Consumer Financial Protection Bureau (CFPB) found that few eligible service members are benefiting from it, saving more than $100 million in interest over 11 years.
important point
- The CFPB found that the vast majority of military personnel did not benefit from the low interest rates offered through SCRA.
- Federal agencies looked at credit card, auto, personal, and mortgage data from 2007 to 2018, specifically for members of the U.S. Army Reserve and National Guard.
- The CFPB also provided some suggestions for maximizing the benefits SCRA provides to military personnel.
SCRA Financial Protections Not Having the Intended Impact
Financial and legal protection under SCRA is intended to enable military service members to devote and focus all their energies to the country’s defense needs. One provision of the law entitles eligible employees to reduced interest rates on pre-work obligations such as credit cards. auto loan, student loan, personal loanWhen Housing loanseconds.
However, in a recent investigation by the CFPB, federal agencies found that targeted military personnel were not getting the promised benefits. The, which includes data for the U.S. Army Reserve and National Guard from 2007 to 2018, found that only 9.5% of covered auto loans and his 5.9% of covered personal loans experienced an interest rate cut during that time. I found
With these two loan types alone, federal agencies estimate that they paid about $100 million in additional interest that military personnel never had to pay.
Service members with longer tenors (usually one year or longer) were more likely to receive lower interest rates, but personal and auto loans were still less than 16% likely. Credit card and mortgage data were too complex to provide similar estimates.
The CFPB has not stated why service members are not receiving the benefits they are entitled to under SCRA, but it is due to the cumbersome request process that requires service members to submit their requests along with a copy of their placement. could be. Or a letter of mobilization to the creditor by certified mail.
CFPB Offers Potential Solutions
In addition to its analysis, the CFPB offers three steps to increase the use of rate reduction provisions under SCRA.
- If a service member requests a reduction for a single account with that institution, we will apply the reduction to all accounts held with that institution.
- Find ways to automatically apply rate cuts to limit wear and tear during the request process.
- Develop comprehensive and regular indicators of SCRA benefit utilization to inform and evaluate future efforts to maximize legal protections.
