Federal Protections for Servicemembers Reinforced

Office of Public Affairs | U.S. Department of Justice | Press Release

The Justice Department and Consumer Financial Protection Bureau (CFPB) issued a joint letter today reiterating financial services providers of their responsibility to recognize interest rate protections that exist for servicemembers, recent veterans and their spouses under the Servicemembers Civil Relief Act (SCRA).

Under the SCRA, servicemembers have additional rights and protections because of the unique financial challenges that often emerge as a result of their service. One provision of the SCRA limits the amount of interest that banks, credit cards and other financial services providers may charge on certain financial obligations that the servicemember incurred before military service to no more than 6% per year, including most fees.

“Servicemembers make great sacrifices to serve our nation and protect our democracy,” said Assistant Attorney General Kristen Clarke of the Justice Department’s Civil Rights Division. “Financial services providers must ensure that servicemembers are afforded their rights and benefits under the law.”

“Many military families have been hit hard by high interest rates on credit cards, mortgages and auto loans, even though they are entitled to an interest rate cap,” said CFPB Director Rohit Chopra. “Financial firms shouldn’t be price gouging those who serve in uniform.”

Recently, the CFPB has published reports on the rising interest rates in both the credit card and mortgage markets. The CFPB’s 2022 analysis estimated that less than 10% of eligible auto loans and 6% of personal loans to activated members of the National Guard and Reserves were receiving interest rate reductions, resulting in nearly $10 million a year in estimated lost savings. With current interest rates on car loans and even mortgages well above 6% for many borrowers, more servicemembers would now benefit from a reduction than in prior years.

Today’s letter ensures that financial services providers are aware of the provision within the SCRA that protects servicemembers against violations of interest rate benefits. If servicemembers make a proper request, a creditor must forgive and not defer any interest greater than 6%. The letter also includes recommendations for financial services providers to further help servicemembers, such as automatically applying the interest rate cap to all eligible accounts held at that institution if a servicemember invokes protections for a single account.

The Justice Department’s Servicemembers and Veterans Initiative coordinates federal resources to build a comprehensive legal support and protection network focused on serving servicemembers, veterans and their families. Since 2011, the department has obtained over $481 million in monetary relief for over 147,000 servicemembers through its enforcement of the SCRA. For more information, visit www.justice.gov/servicemembers.

Servicemembers who are covered by this law are likely eligible for military legal assistance and can contact their local legal assistance office for help. See legalassistance.law.af.mil/ for a list of office locations. If servicemembers are not eligible for military legal assistance services, they may request that the Justice Department review their claim by submitting a complaint at civilrights.justice.gov/report/.

The CFPB provides educational resources to military families, monitors complaints and coordinates with federal partners on matters related to consumer protection for the military community. Additionally, the CFPB has authority to enforce the Military Lending Act, as well as the ability to take legal action to address unfair, deceptive or abusive acts or practices related to consumer financial products or services for all members of the public, including servicemembers, under the Consumer Financial Protection Act.

Consumers encountering problems with interest rates can submit a complaint with the CFPB online or by calling (855) 411-CFPB (2372). The CFPB encourages employees who believe their companies have violated federal consumer financial protection laws to send information about what they know to whistleblower@cfpb.gov.