Military Lending
Practice Overview
Congress has created a number of unique financial protections for members of the military, many of which apply regardless of whether a financial institution is aware of a customer’s military status. The Department of Justice and federal banking agencies have aggressively enforced these laws — the Servicemembers Civil Relief Act and the Military Lending Act —with consumers and class action lawyers also looking to advance novel claims under them. Financial penalties associated with SCRA and MLA violations can be costly, to say nothing of the public relations challenges that can arise from allegations that a company may have mistreated servicemembers. More than half the states have also enacted similar laws offering protections to servicemembers and members of the National Guard.
Buckley lawyers have deep experience with military lending laws and have defended financial institutions in several market-setting regulatory and enforcement actions, regularly obtaining positive results for our clients. Our comprehensive approach to addressing SCRA allegations has proven successful in reducing what, at the outset, appeared to be thousands of potential SCRA errors in some instances to only a handful of violations. Not only do we understand the law as written, but also our extensive work on military lending gives us insights into regulatory expectations, industry best practices, and creative strategies to obtain the best possible outcome for our clients. We appreciate that reputational considerations associated with military lending can create challenges and provide companies with both legal and strategic advice that is sensitive to these dynamics.
We also provide ongoing regulatory guidance to identify risks and prevent enforcement actions before they arise. Buckley lawyers serve as outside compliance counsel to banks, mortgage lenders and servicers, motor vehicle finance companies, insurers, and other consumer financial services companies on dozens of military lending matters. We advise clients with military lending issues such as designing new credit and deposit products, addressing the MLA’s preclusion on mandatory arbitration clauses, creating legally compliant policies and procedures, providing training to senior management and front-line employees, conducting internal and due-diligence reviews, and responding to consumer complaints and regulatory inquiries.
When disasters strike — hurricanes, earthquakes, terrorist activity— governors call upon members of the National Guard to provide essential services, and state laws provide an inconsistent patchwork of both SCRA-like protections and specific protections to support those called to state service. Buckley attorneys monitor state legislative and regulatory developments and routinely advise clients regarding compliance with these laws.
Examples of our military lending representations include:
- Residential mortgage foreclosure: We represented two nationwide banks in the first major SCRA foreclosure actions arising from the financial crisis, in which DOJ developed the legal interpretations and remediation methodology that remain the core of all governmental SCRA foreclosure actions; multiple cases settled collectively, without admission of fault. As part of our work, we also helped these banks implement the injunctive relief provisions of these settlements and construct SCRA Compliance Programs to meet their obligations. We also represented a major mortgage servicer in negotiating and implementing a foreclosure lookback and remediation under the supervision of its federal banking regulator, allowing the bank to avoid a public enforcement action.
- Interest rate benefit: We defended a major federal and private student loan servicer in the first-ever application of the SCRA’s interest rate benefit and default judgment provisions to a student loan servicer, including addressing multiple novel questions of law; the matter settled to resolve all claims without admission of fault. We also directed a major remediation on behalf of a nationwide bank that failed to properly implement the interest rate benefit.
- Motor vehicle lease termination: We represented a major captive auto lender in the first-ever DOJ enforcement action addressing the SCRA’s early lease-termination provision and the refundability of fees; this landmark settlement established an industry-standard methodology for the calculation of amount subject to refund in similar situations and has been used by the DOJ as a precedent for subsequent lease-termination matters; the matter settled to resolve all claims without admission of fault.
- Motor vehicle repossession: We defended a major bank in one of the first-ever DOJ enforcement actions arising from the SCRA relating to automobile repossessions; the matter settled to resolve all claims without admission of fault.
- Wholesale SCRA compliance review: We conducted a wholesale review of SCRA and MLA compliance for a nationwide financial services company, including all traditional consumer credit and deposit products, ancillary products, affiliated insurance companies, and account-level reviews, in response to regulatory criticism.
- Industrywide representation and guidance: On behalf of the financial services industry, we advised several trade groups in a coordinated effort to analyze changes to MLA regulations and request amendments to bring the regulations in line with industry standards and the realities of the credit market, including participating in meetings with key federal policymakers and enforcement agencies.
- Policies, procedures, training, and testing: We have worked closely with dozens of companies to develop SCRA- and MLA-compliant policies and procedures across all consumer product classes, and where needed, have also conducted in-depth training for board members, senior management, and line-level employees, as well as account-level testing for legal and operational compliance.
Articles
"What 4th Circ. military lending case means for auto finance" by Sasha Leonhardt and Cierra D. Newman (Law360)
A split U.S. Court of Appeals for the Fourth Circuit ruled on April 12 that vehicle financing transactions including guaranteed asset protection, or GAP, plans are exempt from the protections of the Military Lending Act. The MLA's statutory text exempts a credit that is "offered for the express...
Articles"After storm and fire: How states protect service members" by Jeffrey P. Naimon and Sasha Leonhardt (Law360)
This has been an active year for National Guard call-ups to active duty, as the U.S. addresses hurricanes, wildfires and the novel coronavirus pandemic. National Guard activations are likely to remain high for several months due to ongoing responses to COVID-19, the National Oceanic and Atmospheric...
Articles"Dorian update: How state laws protect servicemembers" by Jeffrey P. Naimon and Sasha Leonhardt (Law360)
Hurricane Dorian devastated the Bahamas and southeastern United States in late August and early September, and the governors of Florida, Georgia, North Carolina, South Carolina and Puerto Rico authorized the activation of state National Guard forces for response efforts. In addition, the Rhode...
Articles"Takeaways from military member complaints at CFPB" by Jeffrey P. Naimon, Sasha Leonhardt, and Christina R. Smith (Law360)
The Consumer Financial Protection Bureau ’s Office of Servicemember Affairs recently released a report highlighting issues facing military consumers based on complaints submitted by service members, veterans and their families. This report identifies categories and trends among the approximately 48...
Articles"Hurricane Florence: How state laws protect service members" by Jeffrey P. Naimon and Sasha Leonhardt (Law360)
As the southeastern United States braces for Hurricane Florence, the governors of North Carolina, South Carolina and Virginia have authorized their state National Guard for response efforts, and neighboring governors in Maryland and West Virginia have placed their National Guard members on notice...
ArticlesJeffrey P. Naimon and Sasha Leonhardt Authored a Law360 Article, "Harvey Crisis: How State Laws Will Protect Servicemembers"
As Hurricane Harvey devastated Houston and southeastern Texas this past weekend, thousands of first responders were called to action to provide critical assistance to communities along the Gulf Coast. Even as this storm continues to affect those along the water and move inland, rescue operations,...
ArticlesCorporations May Be People, But They Are Not Servicemembers
The Servicemembers Civil Relief Act enables servicemembers “to devote their entire energy to the defense needs of the Nation” by deferring or suspending certain obligations during active duty and for certain periods after the end of active duty. The SCRA’s core protections include interest-rate...
ArticlesExpanding the SCRA, If the DOJ Has Its Way
The last few weeks of 2015 saw two important legislative developments relating to the Servicemembers Civil Relief Act (SCRA). First , in November, the Department of Justice (DOJ) submitted a legislative package to Congress with proposed revisions to several existing laws that protect service...
ArticlesCitizen, Soldier, Small Business Owner? Commercial Lending and the Servicemembers Civil Relief Act
The Servicemembers Civil Relief Act, 50 U.S.C.A. § 3901, provides certain protections to military servicemembers regarding their financial obligations. The act applies to virtually every type of debt that a service member may obtain. It provides benefits such as an interest rate cap and procedural...
ArticlesLandlords, Leases and The Servicemembers Civil Relief Act
As President Obama slows the drawdown of troops overseas — and as the nation expands its fight against ISIS — a growing number of service members will seek the benefits and protections of a nearly century-old law that protects them on the homefront while they serve on active duty: the...
ArticlesSpotlight on the Military Lending Act, Part 3: Falling in Line with MLA Compliance
With recent changes in the regulations implementing the Military Lending Act (“MLA”), creditors are now reevaluating their compliance plans to ensure they are prepared for the new regulations. Although there is no formal guidance on what federal regulators will look for in reviewing MLA compliance...
ArticlesA New Balancing Act: The DOJ Provides New Direction Regarding the SCRA's Interest Rate Benefit
When Congress reenacted the Servicemembers’ Civil Relief Act (“SCRA”) in 2003, Congress designed the SCRA to balance the interests of active duty servicemembers and their creditors, as it had done under the SCRA’s predecessor legislation. One of the benefits provided by the SCRA is a six-percent...
ArticlesStarter Interrupters Expose Lenders to SCRA Risks
As the subprime auto loan market has grown over the past few years, so too have the number of starter interrupters in use. According to a recent New York Times story, these devices have been installed in approximately 2 million vehicles and are used in about one-quarter of all subprime auto loans...
ArticlesFrom Landlord to Locked Up: The Long Arm of the SCRA
Over the past few years, the U.S. Department of Justice and federal banking regulators have aggressively increased their efforts to enforce the SCRA. Both federal and state regulators now focus on SCRA compliance when examining institutions, and government enforcement attorneys are keenly aware of...
ArticlesHighway to the Danger Zone: Automotive Lending and the Servicemembers Civil Relief Act
Over the past few years, federal regulators — led by the Department of Justice — have sharply increased their focus on SCRA compliance. Although most recent headlines related to SCRA enforcement have arisen in the area of home mortgages, several major enforcement actions and multi-million dollar...
ArticlesLenity, Chevron Deference, and Consumer Protection Laws
Several federal statutes, including the Real Estate Settlement Procedures Act (“RESPA”), the Truth in Lending Act (“TILA”) and the Servicemembers Civil Relief Act (“SCRA”) permit the government to seek either civil or criminal penalties for the same conduct. While the executive branch has used its...
ArticlesStudents, Loan Servicers, and the Servicemembers Civil Relief Act
Over the past two years, mortgage loan servicers have faced an onslaught of regulatory scrutiny, enforcement actions and targeted litigation. The Department of Justice, state attorneys general and the federal banking regulators have extracted tens of billions of dollars in settlements, borrower...
Articles'You Can't Handle the Truth!' Fact, Fiction and the Servicemembers Civil Relief Act
Over the past year and a half, several federal agencies, including the Department of Justice, Office of the Comptroller of the Currency and Federal Reserve Board, have turned their attention to promoting compliance with the Servicemembers Civil Relief Act, 50 U.S.C. app. §§ 501. Because military...
Articles
News & Blogs
District Court says MLA’s statute of limitations begins upon discovery of facts
The U.S. District Court for the Eastern District of Virginia recently granted an installment lender’s motion to dismiss, ruling that most of the class members’ claims are time-barred by the Military Lending Act’s (MLA) two-year statute of limitations. Plaintiffs are active duty servicemembers who...
InfoBytesDivided 4th Circuit: Including GAP coverage does not eliminate auto loan exemption from MLA
On April 12, a split U.S. Court of Appeals for the Fourth Circuit held that loans borrowed in part to finance the purchase of a car are not governed by the Military Lending Act (MLA), even when the loan covers additional related costs. While the MLA’s requirements apply to the extension of consumer...
InfoBytesCFPB orders nonbank title lender to pay $15 million for numerous violations
On February 23, the CFPB entered a consent order against a Georgia-based nonbank auto title lender (respondent) for alleged violations of the Military Lending Act (MLA), the Truth in Lending Act, and the Consumer Financial Protection Act. According to the Bureau, the respondent allegedly charged...
InfoBytesFTC, CFPB weigh in on servicemembers’ right to sue under the MLA
On November 22, the FTC and CFPB (agencies) announced the filing of a joint amicus brief with the U.S. Court of Appeals for the Eleventh Circuit seeking the reversal of a district court’s decision that denied servicemembers the right to sue to invalidate a contract that allegedly violated the...
InfoBytesCalifornia amends protections for servicemembers and veterans
On September 27, the California governor signed SB 1311 to enact the Military and Veteran Consumer Protection Act of 2022. The Act updates several provisions related to servicemembers and veterans, including amending existing law to provide that a person will be liable for an additional civil...
InfoBytesCFPB sues online lender to servicemembers
On September 29, the CFPB filed a complaint against a New York-based online lender and 38 of its subsidiaries for allegedly violating the Military Lending Act (MLA) and the Consumer Financial Protection Act by imposing excessive charges on loans to servicemembers and their dependents. The Bureau...
InfoBytesCFPB, DOJ issue letter to auto companies on SCRA provisions
On July 29, the CFPB and DOJ issued a joint letter reminding auto finance companies of legal protections for military families under the Servicemembers Civil Relief Act (SCRA). Among other things, the letter outlines several SCRA provisions that apply to vehicle financing, including: (i)...
InfoBytesCFPB testifies on commitment to servicemembers
On July 13, the CFPB testified before Subcommittee on National Security of the House Committee on Oversight and Reform regarding the Bureau’s efforts with respect to servicemembers. The testimony began by noting that the Bureau “is committed to our mission . . . to educate and empower...
InfoBytesDOJ initiates SCRA action for auctioning servicemember vehicles without court orders
On April 15, the DOJ filed a complaint in the U.S. District Court for the Eastern District of Virginia against a Virginia-based towing company for allegedly auctioning vehicles owned by at least seven active duty servicemembers without first obtaining the required court orders. Under the...
InfoBytesDOJ resolves SCRA violations with credit union
On March 11, the DOJ announced a settlement with a credit union resolving allegations that the credit union violated the Servicemembers Civil Relief Act (SCRA) by charging excessive interest on servicemembers’ loans and repossessing servicemembers’ cars without first obtaining a court order...
InfoBytes
Press Releases & Announcements
BuckleySandler Hosts Eighth Annual Fair Lending Today Conference
BuckleySandler LLP hosted its eighth annual Fair Lending Today conference in Washington, DC on March 13-14, 2016. The two-day event featured an evening of interactive roundtable discussions on fair lending issues, followed by a full day of seminars. The sessions were led by BuckleySandler attorneys...
Press Releases