AFSA Responds to CFPB Servicemember Press Release
Today, AFSA responded to the Consumer Financial Protection Bureau’s CFPB Finds Members of the Reserves and National Guard Paying Millions of Dollars in Extra Interest Each Year press release. The Servicemembers Civil Relief Act (SCRA) entitles active duty servicemembers to an interest rate reduction provided they notify the lender in writing and include a copy of the
orders to active-duty service or a letter from their commanding officer. AFSA and our members support servicemembers, reservists, and National Guard personnel and believe they should take full advantage of the SCRA benefits and those additionally provided by state laws.
However, the December 7 blog posts includes three recommendations for creditors that ignore the statutory requirements of the SCRA, fail to account for the impact of the recommendations on the securitization market, and do not address the limitations of the Defense Manpower Data Center (DMDC) SCRA website. AFSA expands on these three issues in the letter. Below are some top level concerns:
Statutory Requirements of SCRA
- The three recommendations included at the end of the press release are not consistent with the plain language of the law. As the CFPB lacks authority to change the statute, AFSA requests that the Bureau make it clear that creditors complying with the statutory language are not in violation of the law.
Securitization Impact
- The recommendation in the press release to automatically apply the SCRA’s interest rate reduction creates ambiguity under the requirements of some asset-backed securitization (ABS) programs. Some ABS transactions place repurchase obligations on creditors if certain events occur, which typically include changing the customer’s interest rate unless the change is required by law. It is unclear how creditors would need to treat those servicemember accounts if they were to follow the CFPB recommendations contained in the press release.
DMDC SCRA Website Concerns
- There is no discussion in the CFPB’s press release as to whether the DMDC SCRA website can handle that volume without crashing. In our members’ experience, the DMDC system is already periodically unavailable or inaccurate. Increasing the use of the DMDC SCRA so dramatically could cause the site to crash more frequently. When the site is unavailable – whether for a crash or maintenance – creditors cannot access it for interest rate reductions or to be sure they are meeting compliance requirements regarding repossessions. If the website is down more frequently, it will harm both borrowers and creditors.
December 29th, 2022
