Costly Auto Loans
Costly Auto Loans Take a trip down the major road leading to any military installation in the nation, and chances are good that you’ll find auto lots on each side of the road. A previous study by the CFPB found that young servicemembers are more likely to take out auto loans and have more auto debt than their civilian colleagues.
In retrospect, this makes a fair amount of sense. It’s very uncommon for a service member’s initial duty station to be in an area where they’ll require a car in order to travel around on base or to go home after a long day.
Military personnel may benefit greatly from easy access to finance. However, a servicemember’s security clearance might be revoked or they could be discharged if they are unable to keep up with their financial duties. Many members of the armed forces are young, first-time automobile purchasers who are unfamiliar with the ins and outs of establishing credit.
As a result, individuals could settle for loans with conditions that aren’t in their best interest or buy items they don’t really need. Lenders are expected to handle all borrowers with fairness and responsibility, but they must pay special attention to how they treat members of the armed forces and their families.
Twenty percent of young servicemembers have at least $20,000 in vehicle debt by the age of 24, according to CFPB research. This is equivalent to over two-thirds of a young enlisted soldier’s median basic wage at that age. Whereas 71% of citizens don’t have any car debt at age 24, 7% have a similar amount. Delinquency and repossession rates are also higher among young military members, especially those who have served for less than five years. Those who stay in the military for more than five years have crime rates that are comparable to the general population.
Congress approved the Servicemembers Civil Relief Act to provide further protections for active-duty military personnel (SCRA). The SCRA includes special protections for active-duty military members who are at risk of having their vehicles repossessed. While we are aware that the vast majority of lenders do their best to adhere to the SCRA, the Department of Justice (DOJ) has filed lawsuits against many banks over the past five years for illegal car repossession tactics.
The Consumer Financial Protection Bureau (CFPB) just issued a report detailing widespread issues with car loan servicing and improper repossessions. Many financial institutions now deploy starter-interrupt devices, GPS locators, and license plate recognition to find repossessed vehicles at a lower cost to themselves. We are concerned that some communities may be disproportionately affected by the usage of these technologies, and we are working to investigate their effect, including any possible privacy concerns.
To ensure that servicemembers are treated fairly and that all applicable rules and regulations are strictly adhered to, we anticipate that servicers, lenders, and repossession agents will adhere to the standards under the SCRA, especially when employing innovative repossession technology.
If you are a servicemember and you feel that your SCRA rights have been infringed, you should contact your installation’s legal aid office and then the Department of Justice (DOJ). The Consumer Financial Protection Bureau (CFPB) can take your complaint if you have any problem with a financial product or service in general. Our armed forces keep the country safe, and we owe it to them to shield them from any abuses in the banking system.