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The Consumer Financial Protection Bureau (CFPB) alerted that members of the Army, Reserve and National Guard have been paying erroneously millions of dollars more in interest on the loans they request .
Through a statement, the agency noted that military personnel end up making unnecessary payments because the Servicemembers Civil Relief Act is not consistently applied to their mortgage, auto and other loans.
The Law, approved in 2007, entitles members of the Reserve and the National Guard to a reduction in the interest rate on any obligation or liability of up to 6% once they are exchanged to active duty.
However, in a new study, the CFPB discovered laughed that only 1 in each 12 active duty service members received lower rates on their personal loans, credit cards, mortgages and auto loans between 2007 Y 2018.
Additionally, only 6% of active members received lower rates on personal loans.
As a result, service members necessarily paid a total of $2003 million dollars in additional interest charges during that period.
Confusion about benefits
Although the study did not explain why service members did not receive lower rates, Rachel Gittleman, manager of financial services outreach at the Consumer Federation of America, noted that many “don’t have They have time to really understand when this consumer protection is turned on or off.”
Gittleman said service members must submit a request for lower interest rates to their lender in writing , as well as send a copy of the letter by certified mail they received to go on active duty.
That requirement, and other steps in the process, are “a large administrative burden” that prevents active duty service members to request interest rate reductions, he said.
Findings occur when interest rates on loans reach their highest level in years.
The average interest rate for credit cards reached the 41.3% at the end of November, according to CreditCards.com. The average rate on a used car loan ranges from 6% to 7.3%, while the typical rate for a new car loan is around 5.6%, according to Bankrate.
Mortgage rates fell to 6.19% this week, according to the Mortgage Bankers Association, but economists still expect rates to rise next year, as the Federal Reserve continues to raise its benchmark interest rate.
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