On November 18, the GAO released a report examining issues related to implementation of the Servicemembers Civil Relief Act (SCRA) interest rate cap for student loans. The Senate Committee on Homeland Security and Governmental Affairs requested the report in response to indications that servicemembers with student loans who are eligible for an SCRA rate reduction may not always be receiving the benefit. (The SCRA requires creditors and servicers to reduce the interest rate to 6 percent during active-duty service on any pre-service obligation or liability, including student loans.) The GAO report concluded that servicemembers with private student loans may be particularly at risk of not receiving a rate reduction because nonbank private student loan lenders and servicers are subject to neither the same rules nor oversight as those of federal student loans and commercial FFEL student loans (FFEL loans made by private and state lenders that are not owned by the Department of Education). For example, unlike for federal and FFEL loans, servicers of private student loans are not required to identify eligible borrowers and automatically apply the rate cap. Additionally, no agency is currently authorized to routinely oversee SCRA compliance for private student loans made or serviced by nonbank lenders and servicers, such as private companies and institutions of higher education.

In its report, the GAO made a number of recommendations to ensure consistent treatment of eligible servicemembers across all types of student loans. In particular, the GAO recommended that the CFPB coordinate with the DOJ “to determine the best way to ensure routine oversight of SCRA compliance for all nonbank private student loan lenders and servicers,” including developing a legislative proposal to seek additional statutory authority to facilitate such oversight, if necessary.

In its written comments to the report, the CFPB acknowledged that it “shares the GAO’s interest in maximizing the effectiveness of [the] SCRA’s protections” and highlighted the tools currently at its disposal to facilitate SCRA enforcement, such as its collection of SCRA-related consumer complaints and ability to refer potential SCRA violations to the DOJ. Nevertheless, the GAO maintained that the existing tools are insufficient and additional interagency coordination is necessary to close the gap in SCRA oversight.