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On May 6, the CFPB’s Office of Servicemember Affairs (OSA) released its annual report, which provides an overview of OSA’s activities in fulfilling its statutory responsibilities for fiscal year 2020 and covers the period between January 1, 2020 to December 31, 2020. The report also addresses concerns raised by military consumers based on approximately 40,000 complaints submitted by servicemembers, veterans, and their families (collectively “servicemembers”). Key takeaways from the report include the following:
- Financial help due to the Covid-19 pandemic. In response to Covid-19, the Bureau released an online resource “to highlight tools and information that consumers can use to protect themselves and manage their finances, including information on topics such as mortgage and housing assistance, student loans, and avoiding scams.” For servicemembers, the page connects to an OSA blog detailing resources that military personnel can use for immediate financial assistance and to sustain long-term financial well-being.
- Misadventures in Money Management (MiMM). MiMM serves as an online educational tool that provides young servicemembers with an important “baseline of financial education through the power of storytelling and gamification.”
- Consumer Financial Protection Week and Military Consumer Protection Month. OSA took part in a joint webinar with the CFPB’s Office of Older Americans and the Office of Community Affairs, which highlighted initiatives for vulnerable populations and emphasized the “importance of research in understanding the financial well-being of military consumers.” The webinar also unveiled the Bureau’s “first research report that studied how the credit records of young servicemembers coevolve with military service.”
- National Veterans and Military Families Month. During November 2020, OSA organized with other agencies and organizations to encourage the military community to leverage available resources to help improve their financial well-being. These initiatives included, among other things: (i) publishing OSA’s Debt and Delinquency after Military Service research report; (ii) participating in the Bureau’s Financial inTuition Repayment Podcast Series; and (iii) convening “a virtual military consumer webinar with partner agencies and organizations to discuss financial challenges facing servicemembers, veterans, and their families in the financial marketplace.”
- Education and empowerment. The Bureau also “deployed and amplif[ied] [its] financial education tools through partners, engaging servicemembers and military families at townhall-style listening sessions at military installations.”
On September 23, the U.S. District Court for the Eastern District of New York held that an active duty servicemember could not avail herself of the foreclosure protections provided by the Servicemembers Civil Relief Act (SCRA) even though she was a signatory on the mortgage, because she was not a signatory on the note. According to the opinion, the SCRA foreclosure protections are afforded only to an “obligation on real . . . property” which is “secured by a mortgage” and that it is the note “which evidences the obligations, i.e. the promise to pay the debt.” By signing the mortgage, the servicemember-spouse “merely mortgaged her interest in the property, to secure her husband’s obligation to pay.” Accordingly, the court vacated a prior stay of foreclosure.
On September 15, the DOJ announced a settlement with a Texas-based furniture and appliance company, resolving allegations that the company charged excess interest on servicemembers’ purchases in violation of the Servicemembers Civil Relief Act (SCRA). According to the press release, the DOJ launched an investigation into the company after receiving a referral from a United States Army Staff Judge Advocate. After receiving notice of the investigation, the company conducted a self-audit and determined that between March 2014 and May 2019, it had not granted the request for the full six percent interest rate cap required by the SCRA for 184 out of the 322 servicemembers that requested the relief. The complaint, filed by the DOJ in the U.S. District Court for the Southern District of Texas, states that the company “engaged in a pattern or practice of violating” the SCRA by “failing or refusing to timely and/or accurately lower the interest rate on pre-service obligations obtained by at least 184 SCRA protected servicemembers to 6% per year after being provided with the documentation required by the SCRA.”
The settlement notes that the company voluntarily disclosed its findings to the DOJ and issued over $59,000 in refund checks and over $28,000 in account credits to affected servicemembers. The settlement requires the company to pay an additional $500 to each affected servicemember, and to hire an independent consultant to determine if any other servicemembers were overcharged. Additionally, the company is required to make a $50,000 payment to the United States.
On September 10, the DOJ announced a Servicemembers Civil Relief Act (SCRA) settlement with a Florida-based towing and storage company, resolving allegations that the company auctioned cars owned by active duty servicemembers without first obtaining a court order. According to the complaint, filed on the same day as the settlement, the DOJ initiated the investigation into the company after “becoming aware of a complaint” by a U.S. Navy Lieutenant whose car was towed while he was deployed abroad. The DOJ asserts that between 2013 and 2020, the company “auctioned off motor vehicles, without court orders, belonging to at least 33 SCRA-protected servicemembers.” The settlement requires the company to pay nearly $100,000 in compensation to affected servicemembers and a $20,000 civil money penalty. Additionally, the company must develop new SCRA policies and procedures for enforcing storage liens and provide annual SCRA compliance training to all of its employees.
On August 18, the DOJ announced (see here and here) two separate Servicemembers Civil Relief Act (SCRA) actions. First, the DOJ filed a complaint against a Massachusetts-based moving and storage company for failing to obtain a court order prior to auctioning an active duty servicemember’s storage unit, while he was deployed overseas. The DOJ asserts that while a servicemember has no duty to inform lienholders of their military service, the servicemember told the storage company’s agent about his military status during a phone call. Additionally, the servicemember provided the storage company with his address on Hanscom Air Force Base. In the second complaint, the DOJ alleges a Florida-based towing company auctioned a car belonging to an active duty servicemember without obtaining a court order. The DOJ asserts that the towing company had reason to believe the car was owned by a servicemember, including that there was a military decal on the car and the owner’s auto loan was through a military-oriented financial institution. In both actions, the DOJ is seeking damages, injunctive relief and civil penalties.
On August 14, President Trump signed S.3637, which amends the Servicemembers Civil Relief Act (SCRA) to expand the lease protections for servicemembers under stop movement orders in response to the Covid-19 pandemic. Specifically, the SCRA’s lease termination protections are expanded to include situations in which a servicemember executes a residential or motor vehicle lease upon the receipt of military orders for a permanent change of station or deployment and then subsequently receives a stop movement order “in response to a local, national, or global emergency, effective for an indefinite period or for a period of not less than 30 days,” which would prevent the servicemember from occupying the residence or using the vehicle. The amendments are retroactively effective and apply to stop movement orders issued on or after March 1.
On April 15, the CFPB issued a blog post providing resources for servicemembers, veterans, and military families impacted by the Covid-19 pandemic. The Bureau discusses military aid societies where servicemembers and military families can apply for emergency grants and zero-interest loans, and hardship duty pay and other allowances afforded to military families affected by the Stop Movement Order that halted domestic travel by military personnel. The Bureau also provides information for managing mortgage payments and student loans, and reminds active-duty servicemembers, military spouses and National Guard personnel and reservists on active duty for more than 30 consecutive days of their rights under the Servicemembers Civil Relief Act and the Military Lending Act. These will include being able to terminate contracts under certain conditions and to receive protections for many types of consumer credit and loans. The blog post also highlights recent changes made to existing programs due to challenges presented by Covid-19, including the expansion of online access for veterans to file benefit claims and the continuation of GI Bill program funding.
On April 3, the CFPB Office of Servicemember Affairs (OSA) released its annual report, which provides an overview of OSA’s activities in fulfilling its statutory responsibilities for fiscal year 2019 and covers the period between October 1, 2018 and September 30, 2019. OSA’s responsibilities include monitoring complaints from military consumers, and the report highlights issues facing military consumers based on approximately 34,600 complaints submitted by servicemembers, veterans, and their families (collectively “servicemembers”). Key takeaways from the report include the following:
- Education and empowerment. OSA examined financial issues that impact military consumers and provided various educational tools on topics including the Servicemembers Civil Relief Act, the Military Lending Act, mortgage lending and foreclosure protections, and credit reporting and monitoring. These tools include in-person outreach and digital education and engagement resources.
- Consumer complaints. Thirty-six percent of servicemember complaints focused on credit or consumer reporting. Complaints related to debt collection were the second most frequent issue, with most complaints alleging that debt collectors were attempting to collect debt that the servicemember did not owe. In particular, OSA expressed concern about complaints where “the debt collector ‘took or threatened to take negative or legal action.’” With respect to mortgage debt, many servicemembers reported challenges in the payment process, as well as difficulties in being able to afford mortgage payments. With respect to credit cards, the greatest concentration of complaints focused on problems with purchases on statements. Checking or savings account complaints centered on issues related to account management, and more than two-thirds of student lending complaints related to challenges dealing with lenders or servicers. With respect to auto lending, complaints focused on managing the loan or lease. Other complaint categories included money transfers/services and virtual currency, personal loans, prepaid cards, credit repair, and title loans.
- Agency coordination. During the reporting period, OSA coordinated several consumer protection activities with federal and state government agencies, including the Departments of Defense, Veterans Affairs (VA), Education, and Treasury, as well as the FTC, SEC, and state attorneys general. OSA also noted its participation in interagency working groups focused on helping servicemembers.
- Military consumer research. Coordinated research efforts into the financial well-being of veterans and the increased use of home loans guaranteed by the VA are highlighted.
On March 30, the DOJ’s Civil Rights Division released a statement encouraging landlords and property managers to provide flexibility for servicemembers who have had to quickly change housing plans and employment responsibilities. The Division explained that due to the Covid-19 outbreak, a March 13 Stop Movement Order halted domestic travel by military personnel. As a result, many servicemembers who had signed leases for housing in anticipation of a move to a new duty station will not be able to move until May 11, at the earliest. The statement continues that “[c]onsistent with federal and state law” property managers are urged “to afford the men and women of our armed forces maximum flexibility to adjust their residential lease obligations as needed to comply with military orders during this uncertain time.” The statement reminds property managers and landlords of “the responsibilities they have with respect to members of the National Guard and Reserve under USERRA, the SCRA and similar state laws,” adding that the Division “will act swiftly to bring violators to justice.”
Servicemembers with concerns regarding their civil rights should contact the DOJ or their nearest Armed Forces Assistance Program Office.
On August 1, the Department of Justice (DOJ) announced a $3 million settlement with a captive auto finance company, resolving allegations that it violated the Servicemembers Civil Relief Act (SCRA) by repossessing 113 vehicles owned by SCRA-protected servicemembers without first obtaining court orders and failing to refund upfront capitalized cost reduction (CCR) amounts to servicemembers who lawfully terminated vehicle leases early under the SCRA. According to the DOJ’s complaint, when a servicemember terminated their lease early pursuant to the SCRA, the finance company retained the entire CCR amount even though the SCRA requires that it refund all lease amounts paid in advance for a period after the effective date of the termination. The settlement agreement covers all repossessions of servicemembers vehicles and leases terminated by servicemembers since January 2008, and requires the finance company to create an almost $3 million settlement fund to compensate affected servicemembers and pay the U.S. Treasury $62,000. Moreover, the agreement requires the finance company to review and update its SCRA policies and procedures to prevent future violations and to provide SCRA compliance training to specified employees.
- Jeffrey P. Naimon to provide “Fair lending update” at the Colorado Mortgage Lenders Association Operational and Compliance Forum
- Kari K. Hall to discuss “Justice for all: Achieving racial equity through fair lending” at CBA Live
- Warren W. Traiger to discuss “On the horizon for CRA modernization” at CBA Live
- APPROVED Webcast: Strategy & Technology: A dynamic duo for successful regulatory exams
- Melissa Klimkiewicz to participate in Q&A on flood insurance at the NAFCU Virtual Regulatory Compliance School
- Daniel R. Alonso to discuss “Primer on cross-border prosecutions in Argentina, Brazil, Colombia, and Mexico for U.S. criminal lawyers” at a New York City Bar Association webinar
- Jonice Gray Tucker to discuss "Fair lending" at the Mortgage Bankers Association Regulatory Compliance Conference
- Michelle L. Rogers to discuss “State law regulatory and enforcement trends” at the Mortgage Bankers Association Regulatory Compliance Conference
- Jonice Gray Tucker to discuss “Government investigations, and compliance 2021 trends” at the Corporate Counsel Women of Color Career Strategies Conference
- Max Bonici to discuss “BSA/AML trends: What to expect with the implementation of the AML Act of 2020” at the American Bar Association Banking Law Fall Meeting
- H Joshua Kotin to discuss “Modifications and exiting forbearance” at the National Association of Federal Credit Unions Regulatory Compliance Seminar
- Jonice Gray Tucker to discuss “Fintech trends” at the BIHC Network Elevating Black Excellence Regional Summit
- Amanda R. Lawrence to discuss “Consumer financial services government enforcement actions – The CFPB and beyond,” at the Government Investigations & Civil Litigation Institute Annual Meeting
- Jonice Gray Tucker to discuss "Consumer financial services" at the Practising Law Institute Banking Law Institute