CFPB Finds Servicemembers Pay More Than Civilians for Auto Loans

The Consumer Financial Protection Bureau (CFPB) said Wednesday (Jan. 29) that it will continue to protect servicemembers’ financial interests after finding that servicemembers pay more than civilian borrowers when taking out credit to buy a car.

“Because servicemembers are often required to have a personal vehicle for transportation in order to fulfill their military obligations, and because they may be young men and women far away from family supports, they may be especially vulnerable to overreaching lending practices and have fewer resources to draw upon,” the regulator wrote in a Wednesday press release.

The CFPB found in a report released Wednesday that servicemembers borrow more while putting down less. They borrow $2,200 more than civilians for new vehicles and $400 more for used vehicles, and put down $1,100 less in down payments on new vehicles, according to the release.

The regulator also found that servicemembers pay higher rates over longer terms. Compared to civilians, they face average annual percentage rates that are 0.6 percent points higher and loan terms that are longer, resulting in servicemembers having monthly payments that are $20 higher and amount to $1,300 more over the life of the loan.

Servicemembers also pay more than civilians for add-on products like warranty, service and maintenance plans and guaranteed asset protection (GAP) insurance products, the report found. On average, they pay $140 more, per the release.

While saying in the release that it will continue to protect servicemembers’ financial interests, the CFPB pointed to actions it has taken in this area in recent years.

Examples include the CFPB ordering Navy Federal Credit Union to repay its customers $80 million after the regulator found that the financial institution had charged members, including active duty servicemembers and veterans, illegal overdraft fees; suing online lender MoneyLion and 38 of its subsidiaries for allegedly imposing illegal charges for servicemembers and dependents; and suing pawn lenders FirstCash and Cash America West for allegedly charging active-duty servicemembers too much on loans.

When announcing its settlement with Navy Federal Credit Union in a November press release, CFPB Director Rohit Chopra said: “The CFPB’s work to rid the market of illegal junk fees has saved America’s families billions of dollars.”