Service members enjoy federal 6% cap on interest rates

Jan 16, 2024 | Around Ottawa County | 0 comments

The Service Members Civil Relief Act (SCRA) made the news recently because it caps interest rates for active duty service members at 6 percent. It turns out many big banks — JP Morgan Chase, Wells Fargo, Bank of America, and Citibank among them — place the burden on service members to request these protections.

The underutilization of SCRA rate reductions cost service members $100 million over a 10-year period. When pressed by Senator Sherrod Brown, chairman of the banking committee, the four CEOs asserted their respect for service members, but declined to say that they would take proactive action to provide SCRA benefits for service members, said Brown.

“Service members’ steady income and frequent moves make them a frequent target for predatory financial companies and scammers,” wrote Brown. “Active duty service members have much on their mind, from deployment, to concerns about leaving their families, to returning home. Banks should not place the burden on service members to request protections they are legally entitled to receive.”

Despite the interest rate benefit, SCRA is underutilized, costing service members potentially millions. According to the Consumer Financial Protection Bureau (CFPB), members of the Reserves and National Guard get rate reductions for fewer than 10 percent of auto loans and 6 percent of personal loans.

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June 2024

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