Protecting military members from expensive auto loans and unlawful seizures

If you take the main road to most military bases around the country, you’ll likely see car dealerships lining both sides of the street. Previous CFPB research has shown that young servicemen tend to take out car loans soon after joining the military and take on more debt than their civilian peers. It’s not entirely surprising. When many service members complete basic training, their first duty station is often in an area where a car is needed to get around or off base.

Access to credit can be an important and valuable tool for the military. At the same time, if a military member becomes unable to meet their financial obligations, it can result in adverse personal actions such as lost security clearance or potential discharge. Many service members are young first-time car buyers with limited knowledge of products and credit terms. Consequently, they may be more likely to accept products they do not need or to understand or receive loan terms that are not in their best interest. While we expect lenders to treat all borrowers fairly and responsibly, lenders should take special care in how they treat military members and their families.

CFPB research shows that by the age of 24, about 20% of young military personnel have at least $20,000 in auto debt, or nearly two-thirds of the typical base salary of a young soldier at that age. In comparison, only seven percent of civilians at age 24 have the same amount of car debt while 71 percent do not. Young servicemen also generally have higher rates of delinquency and repossession, especially those who serve less than five years. Those who remain in service for more than five years have delinquency rates virtually indistinguishable from those of civilians.

To better protect those who serve in our armed forces, Congress passed the Military Civilian Relief Act (SCRA). Among other protections, the SCRA offers specific warranties to active duty military personnel facing repossession of their car. Although we know that many lenders take SCRA seriously, over the past five years the Department of Justice (DOJ) sued several lenders for breaking the law in their automatic repossession practices.

The CFPB recently issued a bulletin outlining some concerns about auto loan servicing and wrongful repossessions for all consumers. Plus, it’s cheaper to repossess a car because many lenders now use certain technologies that make it easier to locate the vehicle, including start-stop devices, GPS locators, and license plate recognition. . We are concerned that the use of these technologies may have a disproportionate impact on certain communities and we are taking steps to better understand their impact, including potential privacy issues.

We expect service agents, lenders and repossession agents to adhere to SCRA requirements, particularly when using new repossession technologies to ensure service members are treated fairly. and that all applicable laws and regulations are strictly observed.

If you are a member of the Service and believe that your SCRA rights have been violated, we encourage you to contact your local legal support office and file a complaint directly with the DOJ . If you are having more general difficulties with a financial product or service, you can file a complaint with the CFPB. The military is responsible for protecting our country and we are committed to protecting them from unfair or illegal financial services practices.