DOJ and CFPB send notification letter to auto finance companies regarding SCRA protections | Ballard Spahr LLP

On July 29, 2022, the Department of Justice (DOJ) and the Consumer Financial Protection Bureau (CFPB) issued a notification letter (the “joint letter”) to “remind” auto lenders and leasing companies of the protections provided to servicemembers and their dependents under the Servicemembers Civil Relief Act (SCRA).  The joint letter provides a very basic overview and reminder of the vehicle repossession protections, early vehicle lease termination rights, and interest rate cap available to eligible servicemembers under the SCRA.

July was Military Consumer Month, which likely explains the timing of the joint letter.  The CFPB press release announcing the joint letter cites to a 2020 CFPB report that was recently discussed in a July 2022 CFPB blog post titled “Protecting servicemembers from costly auto loans and wrongful repossessions.”  According to that report, titled “Financially Fit? Comparing the Credit Records of Young Servicemembers and Civilians,” approximately 20 percent of young servicemembers have at least $20,000 in auto debt by the age of 24.  This is a significantly higher percentage of civilian borrowers in that age cohort.  According to the CFPB, young servicemembers also generally have higher delinquency and repossession rates than civilians of the same age, although those rates level off after five years of active duty service.  The press release announcing the joint letter also cites to the CFPB’s Spring 2022 Supervisory…