On Friday, July 29, 2022, the CFPB and Justice Department issued a Joint Letter reminding auto lenders of their responsibilities to recognize important legal protections for military families under the Servicemembers Civil Relief Act (SCRA). This letter comes months after the CFPB issued a compliance bulletin on repossessions. The CFPB also addressed repossession compliance issues in its Spring 2022 Supervisory Highlights.
The Joint Letter was a reminder to lenders of key provisions within the SCRA, including:
- Wrongful vehicle repossessions: The SCRA prohibits a lender from repossessing a motor vehicle during the borrower’s military service without a court order. The letter reminders lenders that a violation of this law can lead to criminal penalties.
- Failure to terminate vehicle leases without penalty: The SCRA allows servicemembers to terminate motor vehicle leases early and without penalty in certain situations.
- Violations of auto loan interest rate benefits: The SCRA limits interest rates on loans incurred prior to military service to no more than 6% per year. This cap on interest includes a cap on most fees. If servicemembers make a proper request, a creditor must forgive any interest greater than 6%. Any interest already paid must be refunded to the borrower.
A copy of the Joint Letter can be found here.
In light of the CFPB’s focus on repossessions, if you have not recently reviewed your Policies and Procedures related to repossession, especially involving those protected by the SCRA, we recommend you review those policies and procedures now. If you have questions or need a legal review, please do not hesitate to contact a lawyer at Sorenson Van Leuven.
