Military servicemembers have additional rights to protect them and their families against unique financial challenges, auto finance companies were reminded, and warned, in a letter issued Friday by the federal consumer financial protection agency and the nation’s top law enforcement agency.
The joint letter from the Consumer Financial Protection Bureau (CFPB) and the U.S. Department of Justice (DOJ) is designed, the agencies said, “to ensure that auto finance companies are aware of key provisions” within the law that provides the protections to the servicemembers, the Servicemembers Civil Relief Act (SCRA). Those include:
- Wrongful vehicle repossessions: The law 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 law 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.
- Violations of auto loan interest rate benefits: The law also limits interest rates on loans incurred prior to military service to no more than 6% per year, including most fees. If servicemembers make a proper request, a creditor must forgive and not defer any interest greater than 6%.