In a new report released today, the Consumer Financial Protection Bureau raised concerns that servicemembers are paying extra in interest each year as a result of not taking advantage of interest rate reductions to which they are entitled under the Servicemembers Civil Relief Act. Under the law, servicemembers have the right to request interest rate reductions on outstanding loans during their time on active duty, plus an additional year in the case of mortgages.
In its analysis of historical data, the bureau found that in the years between 2007 and 2018, fewer than 10% of eligible auto loans and 6% of personal loans received reduced interest rates—resulting in foregone savings of $77.3 million and $23.9, respectively.
To help ensure that servicemembers receive the benefits of the interest rate reduction, the bureau recommended that creditors apply SCRA interest rate reductions for all accounts held at an institution if a servicemember invokes their right for a single account, that they consider automatically applying SCRA rights and consider developing comprehensive and periodic indicators of SCRA interest rate utilization.
