Servicemembers in the Spotlight : CFPB Finds SCRA Interest Reduction Underutilized by Active Duty Servicemembers
In early December 2022 , the Consumer Financial Protection Bureau ( CFPB ) conducted a data analysis to better understand the use of the Servicemembers Civil Relief Act ( SCRA ). In this analysis , they discovered that although the SCRA offers quite a few benefits for active duty servicemembers , fewer than 10 % of auto loans and 6 % of personal loans received a reduced interest rate .
According to the CFPB ’ s calculations , nearly $ 100 million of benefits have been forgone , as well as potential individual savings being , on average , over $ 1,000 less per activation than servicemembers could be receiving had they signed up for the benefits .
Due to this underutilization , the CFPB is officially recommending financial institutions enhance their general programming to encourage use of the SCRA , by potentially automating the SCRA profile rate reduction to every account an individual owns and developing comprehensive programs to determine the financial institution ’ s SCRA utilization .
The History of the SCRA
In general , active duty servicemembers and veterans receive benefits from financial institutions for their military service . In some cases , this is simply because organizations and institutions want to respect those who served , while in other cases , the benefits exist to safeguard certain rights or to enhance certain rights .
The SCRA was created as a safeguarding measure for servicemembers in the event that “ legal or financial transactions adversely affect their rights during military or uniformed service .” Around the time of the Civil War , the precursor to the SCRA passed as a near total moratorium on civil proceedings , to protect soldiers from lawsuits while they were on duty , and to protect them from asset seizure , foreclosure , bankruptcy and divorce . According to the United States Congress , these measures were enacted so soldiers wouldn ’ t have to worry about problems at home , while also honoring their pre-service debts to offset the poor pay from the military at the time .
In the early 1900s , the Soldiers ’ and Sailors ’ Civil Relief Act of 1918 was passed for most of the same reasons as the legislation passed during the Civil War . However , this time it did not include a complete moratorium on civil actions and was set to expire after World War I .
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