Are servicemembers more financially vulnerable than the civilians they protect? Recent enforcement actions suggest that, in the CFPB’s view, they are. While the Servicemembers Civil Relief Act (SCRA) provides more financial protections to servicemembers than civilian consumers have, the Bureau has also begun to use the CFPA to assert “abusive” claims in cases involving alleged acts or practices affecting servicemembers.
The “abusive” prong of the CFPA’s UDAAP provision provides that the Bureau can declare an act or practice abusive when it takes unreasonable advantage of consumers in certain circumstances that may make them more vulnerable, such as when the customer may not understand the risks, costs, or conditions of the product or service, or where the customer is unable to protect his or her interest in selecting or using the product or service. The “abusive” prong may capture acts that are not deceptive or unfair, and in some cases may depend on facts about the consumer that a defendant may not be in a position to know.
Last week, the Bureau sued Security National Automotive Acceptance Company (SNAAC), an Ohio-based auto finance company that specializes in lending to active-duty and former military to buy used motor vehicles. The Bureau claimed that SNAAC leveraged servicemembers’ military status in collecting debts, allegedly exaggerating the potential that the servicemembers could face adverse career consequences or actions under the Uniform Code of Military Justice for nonpayment. In the Bureau’s view, these steps amounted to taking unreasonable advantage of the servicemembers’ inability to protect their interests. The abusiveness claim in the SNAAC litigation echoes some of the allegations in last year’s complaint against Freedom Stores, Inc., a furniture and electronics retailer that caters to U.S. military members with stores located near military bases nationwide, its affiliated financing entity, and its owners. There, the complaint asserted, among other things, that Freedom Stores had taken unreasonable advantage of military consumers’ inability to protect their interests by including Virginia forum selection clauses in contracts with servicemembers stationed far from Virginia.
What does this increased application of the “abusive” prong to military consumers mean for providers of financial products and services? While we often think of elderly or low-income consumers as financially vulnerable, the CFPB views servicemembers as vulnerable too. For that reason, they may be subject to additional claims under the CFPA.