What is the Statute of Limitations on Legal Actions to Collect a Debt?
If you follow the Consumer Financial Protection Bureau (CFPB), you will know that the CFPB has been busy providing additional guidance and creating additional work for financial institutions.
One recent announcement from the CFPB has the potential to change how the industry has handled compliance under the Servicemembers Civil Relief Act (SCRA). On December 7, 2022, the CFPB issued guidance based upon its findings that members of the Reserve and National Guard are paying an extra nine million ($9,000,000) in interest every year because lenders are not complying with the requirements of the SCRA.
As you are aware, the SCRA gives servicemembers on active duty the right to request interest rate reductions on outstanding loans that were incurred prior to active military duty. The interest rate reduction provision of the SCRA allows a person on active duty to receive a reduction of their interest to six (6) percent. The law provides that a person can take advantage of the interest rate reduction by making a written request to the lender and providing the lender a copy of their orders establishing when they became active duty.
Considering the CFPB findings and concerns, the CFPB made the following recommendations: (1) Creditors should apply the SCRA interest rate reduction for all accounts or loans held at the financial institution if the person invokes their rights for a single account or loan; and (2) Creditors should automatically apply SCRA rights. While the first recommendation is not controversial, the second recommendation is controversial. While the CFPB does not make specific recommendations, it is suggesting that lenders take on additional compliance burdens not set forth in the law. How often should a lender scrub loans for borrowers who are active military, can such a scrub of loans be done through an automated process, or would such efforts require manual review? The CFPB does not answer any questions that are likely to be raised by their recommendations.
Furthermore, it does not explain whether its recommendations are required under the law. SVL will continue to monitor this matter and all guidance, regulation, and actions of the CFPB.