Today's Trends in Credit Regulation

SCRA Front and Center
By Shelley B. Fowler

Delaware Attorney General Beau Biden sent letters to nearly 30 lending institutions in September asking for information about their compliance with the Servicemembers Civil Relief Act. The SCRA and similar state laws provide certain protections and benefits to servicemembers, their dependents, and persons who may be liable on obligations owed by servicemembers. According to the AG's press release, the letters - which went to ACS Education Services, AES/PHEAA, Ally Financial, American Express, Bank of America, Barclay's, Citibank, Citibank the Student Loan Corporation, Discover, Fifth Third Bank, Ford Motor Credit, GE Capital Retail Bank, HSBC, Nelnet, PNC Bank, Regions Bank, Sallie Mae, Toyota Financial, U.S. Bancorp, USAA, Wells Fargo, and Wells Fargo Dealer Services - demanded information about what those entities are doing to determine if they have violated the SCRA in the past and what steps they are taking to ensure that they are in compliance with the law moving forward. Specifically, the letters requested:

  • documentation of any internal review conducted to determine whether there has been compliance with the SCRA, including documents reflecting the findings of such review;
  • all written policies, procedures, and practices in place used to verify compliance with the SCRA;
  • the total number of customer files reviewed for SCRA compliance, both in Delaware and nationwide;
  • documentation concerning any SCRA violations identified during reviews;
  • all written policies, procedures, and practices in place concerning the provision of remediation to account owners to address any judgments obtained in error or other actions taken in violation of the SCRA;
  • documentation of steps taken to prevent future SCRA violations; and
  • compliance with the SCRA.

The letters were sent in light of recent settlements between the federal government and large banks over violations of the SCRA, particularly the July 2012 settlement between the U.S. Department of Justice and Capital One and the September 2013 settlement between the Office of the Comptroller of the Currency and JPMorgan Chase Bank, N.A., and related entities.

The AG also sent letters to the chairmen of the U.S. House and Senate's veterans affairs committees, urging them to change federal law to allow state attorneys general to prosecute violations of the SCRA.

In case you think that the SCRA does not apply to your business, keep in mind that the SCRA imposes requirements and obligations upon various creditors, including vehicle-secured creditors and vehicle lessors. Among the SCRA provisions that impact a creditor or lessor are the following:

  • required reduction of the servicemember's interest rate to not more than 6% during military service;
  • required forgiveness of the "excess" interest over 6% during the period of military service;
  • required reduction of installment payment amounts for pre-computed contracts;
  • servicemember's ability to terminate motor vehicle leases without penalty;
  • limitations and/or prohibitions on a creditor's ability to terminate or rescind a contract or lease or repossess the personal property securing the obligation;
  • limitations on the creditor's ability to execute on a servicemember's personal property when the servicemember has personally guaranteed a business credit obligation;
  • limitations on a creditor's ability to obtain a default judgment against a debtor who may be a servicemember;
  • required stays of proceedings against servicemembers; and
  • dependents', co-obligors', and guarantors' ability to obtain relief from obligations involving the servicemember.

Now might be a good time to investigate whether you are complying with the SCRA before the fed or your state AG comes knocking.

Shelley B. Fowler is a Managing Editor of CARLAW, HouseLaw, PrivacyLaw, and Spot Delivery. Shelley can be reached at 410-865-5406 or by e-mail at

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