On August 29, OCC Senior Deputy Comptroller Grovetta Gardineer delivered remarks at the 2016 Association of Military Banks of America Workshop, emphasizing the significance of banks’ compliance with the Servicemember Civil Relief Act (SCRA) and the Military Lending Act (MLA). Although Gardineer noted that SCRA-related issues have decreased since making SCRA compliance an examination focus, she stressed that room for improvement remains. Gardineer advised banks to perform due diligence with third-party vendors, noting that banks “will be held accountable for failures” by their third-party vendors. Gardineer further cautioned that, in light of the new MLA requirements taking effect on October 3, banks must ensure that they properly identify military borrowers entitled to the MLA’s expanded coverage, which will include “nearly all consumer credit covered under the Truth in Lending Act.”
On September 29, the DOJ and OCC announced separate settlement agreements with a major U.S. bank regarding alleged violations of the Servicemembers Civil Relief Act (SCRA). The DOJ’s complaint alleged that the bank repossessed vehicles owned by active duty servicemembers without the required court orders. Under the DOJ consent order, the bank agreed to pay $10,000 to each affected servicemembers whose vehicles were repossessed between from January 2008 to July 2015 not in compliance with SCRA, plus any lost equity in the repossessed vehicle, with interest. The DOJ identified 413 affected servicemembers and the bank agreed to set aside $4,130,000 (or more if needed) to pay the required compensation. The bank also agreed to pay a $60,000 civil penalty. The DOJ acknowledged that the bank had in 2014, prior to the investigation, taken steps to ensure SCRA compliance with a full-scale review of its portfolio to identify servicemembers for SCRA protection, and had previously and voluntarily commenced efforts to compensate any affected borrowers. In the OCC consent order, the OCC found errors and deficiencies by the bank in four areas: (i) applying the 6% interest rate cap; (ii) filing accurate military status affidavits; (iii) repossessing servicemembers automobiles while they were on active duty; and (iv) implementing its SCRA compliance program. Under the consent order for a civil money penalty, the bank agreed to pay a civil money penalty of $20 million, to create a remediation plan for affected servicemembers, and to bolster its SCRA-related policies and procedures.
On August 10, the DOJ announced that a private military housing provider agreed to pay $200,000 to settle allegations that it violated the SCRA by obtaining default judgments against active-duty servicemembers and their families and subsequently evicting them. According to the DOJ, the company violated the SCRA when it requested default judgments against active-duty servicemembers without filing the appropriate affidavits “to alert the court of the tenants’ military status.” Under the terms of the proposed consent order, the company must (i) pay each servicemember affected by its actions $35,000 and vacate the judgment; (ii) forgive deficiency balances and request that the credit bureau remove evictions from effected credit reports; and (iii) pay a civil penalty of $60,000 to the United States. The consent order is pending approval by the U.S. District Court for the Southern District of California. The DOJ noted that this is the first case it has filed alleging illicit eviction of servicemembers from their homes.
California AG Harris filed a parallel suit against the defendants, arguing that the evictions violated the California Military and Veterans Code, the SCRA, state debt collection laws, and state privacy laws.
On July 26, the DOJ filed a complaint against a Michigan-based credit union for alleged violations of the SCRA’s prohibition against motor vehicle repossession from an active-duty servicemember without a court order. Under the SCRA, a court must “review and approve a lender’s repossession of any motor vehicle owned by a servicemember if the servicemember took out the loan and made a deposit or an installment payment before entering military service.” According to the complaint, the credit union failed to, among other things, (i) establish vehicle repossession procedures that included checking the Department of Defense’s database to determine customers’ military status; (ii) implement written policies concerning compliance with the SCRA; and (iii) obtain the necessary court order to initiate and complete repossession of a motor vehicle owned by a member of the U.S. Army. The DOJ further alleges that the credit union’s conduct was “intentional, willful, and taken in disregard for the rights of servicemembers.” The complaint seeks monetary consumer relief, civil penalties, and changes to the credit union’s repossession procedures.
On June 10, the OCC released Bulletin 2016-20 to inform national banks, federal savings associations, and federal branches and agencies of foreign banks (OCC-supervised institutions) of recent temporary amendments to the Servicemembers Civil Relief Act (SCRA). As previously covered in InfoBytes and as outlined in the OCC’s Bulletin, the Foreclosure Relief and Extension for Servicemembers Act 2015 extends through December 31, 2017 the SCRA provision that protects servicemembers against sale, foreclosure, or seizure of property based on a breach of a secured obligation without a court order or waiver for one year following completion of their service. The OCC’s Bulletin notes that HUD updated its “Servicemembers Civil Relief Act Notice Disclosure” (Form 92070) to reflect the temporary extensions.