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Volume XII, Number 272

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CFPB and DOJ Caution Auto Industry on SCRA Protections

Auto finance companies and others in the auto space should take note of a recent joint letter issued by the Consumer Financial Protection Bureau (CFPB) and Department of Justice (DOJ) about the legal protections under the Servicemembers Civil Relief Act (SCRA). In the letter, CFPB Director Rohit Chopra set out that “[t]he CFPB is closely monitoring the auto finance industry to ensure that servicemembers and their families are being treated fairly.”

The letter outlined three main provisions that the auto world should be aware of:

  1. Wrongful vehicle repossessions – The SCRA prohibits repossession of a car during a period of military service unless there is a court order or if the car loan was incurred before the period of service. There is no notice requirement from the borrower for this protection as the auto finance company has the burden of identifying whether the borrower is protected. Verification can be conducted via the Defense Manpower Data Center (DMDC) website.

  2. Failure to terminate vehicle leases without penalty – Under the SCRA, a servicemember can terminate motor vehicle leases early without penalty after entering service or upon receiving qualifying permanent change of station (PCS) or deployment orders. When servicemembers terminate motor vehicle leases, the SCRA requires that they be refunded all lease amounts paid in advance after the effective date, including “capitalized cost reduction” amounts.

  3. Interest rate benefits – If a loan was incurred prior to service, the SCRA limits the interest rate to 6% upon a proper request from the servicemember. The amount above 6% must be forgiven and not merely deferred and applied retroactively back to the date of SCRA eligibility. This provision of the SCRA requires a written notice from the servicemember during the period of service or within 180 days of leaving service. 

The joint letter noted that many servicemembers carry higher auto loan debt at younger ages due to their need for transportation on military bases and are commonly targets for predatory lending practices. The DOJ is directly responsible for enforcing the SCRA, whereas the CFPB monitors complaints and can enforce unfair, deceptive, or abusive practices against servicemembers. 

The joint letter should serve as a reminder to auto finance lenders and servicers to have a robust SCRA compliance program as the DOJ and CFPB will be watching.

© 2022 Bradley Arant Boult Cummings LLPNational Law Review, Volume XII, Number 220
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About this Author

Keith S. Anderson Financial Services Attorney Bradley Arant Boult Cummings law Firm Birmingham Alabama
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Keith Anderson has wide-ranging experience across multiple jurisdictions and concentrates his practice on representing financial institutions in the financial services industry, as well as representing employers in employment matters.

His financial services practice includes representing financial institutions, mortgage lenders and servicers, student loan lenders and servicers, auto-finance lenders in defensive litigation throughout the country. Keith has handled causes of action and advised on matters including TILA, RESPA, HOEPA, FDCPA, FCRA,...

205.521.8714
C. Meade Hartfield Financial Litigation Lawyer Bradley Birmingham
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Meade Hartfield has represented clients nationwide in a variety of industries, including financial services, automotive, aviation, drug and medical device, industrial equipment, insurance, and environmental. Her financial services practice includes representing financial institutions, auto-finance lenders and mortgage companies in defensive litigation matters throughout the country. She also spearheads regulatory compliance services in response to pending or new legislation. Her product liability work includes personal injury and class action defense for various...

205-521-8196
Andrew J. Narod Financial Lawyer Bradley Arant Boult Cummings LLP
Partner

Andrew Narod is an experienced litigator who represents bank and non-bank financial services institutions and other types of businesses in class-action litigation, complex commercial litigation, and other high-profile litigation disputes nationwide. His clients entrust him to navigate some of their most sensitive litigation matters in some of the most difficult venues in the country.

A considerable amount of Andrew’s practice is devoted to representing bank and non-bank financial services entities in class-action litigation and other consumer litigation matters. His clients include...

202-719-8271
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