Broad-based regulatory scrutiny by multiple regulators on the fair treatment
of servicemembers goes beyond compliance with the SCRA.
On July 8, 2015, the Office of the Comptroller of the Currency (OCC) took
the unusual step of assessing a $30 million civil penalty against JP Morgan
Chase Bank N.A. (Chase) for improper debt collections practices and violations
of the Servicemember’s Civil Relief Act (SCRA) that were originally
cited by the OCC in a 2013 order. The OCC’s action came on the same
day the CFPB, along with the Attorneys General in 47 states and the District
of Columbia, announced debt collection enforcement actions against Chase
ordering reimbursement and penalties totaling $186 million. Comptroller
Thomas Curry explained the OCC’s action by stating:
Today, after having taken time to assess the full extent of the deficiencies,
we are joining with the CFPB and the states in assessing monetary penalties.
These come on top of the restitution required by our previous order, and
they will help ensure that banks treat all customers, including member[s]
of the armed services, fairly.[1]
In the same statement, Comptroller Curry emphasized that “Compliance
with the Servicemembers Civil Relief Act, or SCRA, is a matter of great
concern to me and to the OCC” and reiterated that “SCRA compliance
[will continue to] be evaluated as part of every exam at every institution
we supervise.”[2] This latest OCC SCRA enforcement action follows the OCC’s $30 million
civil penalty on June 1st against Bank of America for violations of the SCRA.[3]
Recent enforcement actions aimed at protecting servicemembers from financial
harm have not been confined to matters involving SCRA compliance. For
example, in addition to issuing its own consent order against Chase, the
CFPB announced three formal enforcement actions during the past three
months for alleged unfair, deceptive, or abusive acts or practices (UDAAP)
involving marketing, debt collection practices, and assessments of fees
affecting servicemembers.[4] In short, examiners are taking a deep, comprehensive look at the treatment
servicemembers are receiving in their consumer financial dealings, and
SCRA compliance is just one factor in that broad-based focus—albeit,
a highly important factor.
On April 27, 2015, in connection with the CFPB’s issuance of its annual
Snapshot of Complaints Received from Servicemembers Veterans and their Families, CFPB Assistant Director for the Office of Servicemember Affairs, Holly
Petraeus singled-out servicemember account servicing as a particular focus
of attention:
Basic account servicing stands out as a significant area of concern for
servicemembers. Most customers can call their financial institution, visit
a branch, or connect online to try and get the help they need to maintain
their account. Unfortunately, for military personnel and their families,
the realities of military life, including deployments, frequent moves,
and a high operational tempo, can sometimes make access to those services
extremely challenging.[5]
In addition to regulator enforcement actions, the protection of servicemembers
against financial abuse is the subject of two pending federal proposed
rulemakings. First, in its proposed rulemaking interpreting the Fair Debt
Collections Practices Act through Regulation F, the CFPB suggests a number
of new regulatory restrictions regarding permissible debt collection communications
practices with servicemembers, their commanding officers and spouses,
certain of which the CFPB has begun to enforce through UDAAP.[6] The following exemplifies negative practices that the CFPB is looking to limit:
Collectors may communicate with spouses while servicemembers are deployed
to combat zones or qualified hazardous duty areas. Collectors may ask
military spouses to pay the debts of these consumers during periods when
it is difficult for the spouse to contact these consumers, or when such
contact may interfere with combat readiness. Alternatively, collectors
may contact military spouses during the potentially sensitive period immediately
following the death of a servicemember serving in a combat zone or qualified
hazardous duty zone, with the hope of obtaining payment from the spouse’s
military death gratuity.[7]
Second, the Department of Defense (DOD) interpreted the Military Lending
Act (MLA) to propose revisions to 32 C.F.R. Part 232, which protects servicemembers
and their covered dependents from predatory lending practices. The proposed
revisions would provide a broader range of closed-end and open-end credit
products, including credit card accounts.[8] The MLA imposes a maximum interest cap of 36% (which is calculated according
to DOD rules that are more stringent than those of Regulation Z by encompassing
all fees), mandates certain disclosures, and prohibits mandatory arbitration.
Further action on both of these proposed rulemakings is expected later
this year.
In sum, today’s supervisory environment for issuers of consumer financial
products is marked by unprecedented close scrutiny by a number of different
federal agencies who are seeking to ensure that servicemembers are treated
fairly in all aspects of their financial dealings. Bridgeforce Law can
provide assistance in assessing the current state of your institution’s
compliance with the SCRA and emerging expectations for the fair treatment
of servicemembers. We work with a variety of banks, ranging from the nation’s
largest financial institutions to community banks, to arrive at solutions
that are both technically compliant and practical in operation. To this
end, we frequently call upon industry consultants whenever real-life,
deep operational experience will help facilitate long term, sustainable
compliance solutions.
[5] http://www.consumerfinance.gov/blog/category/servicemembers/
[7] 78 FR 67866 (November 12, 2013).
[8] 79 FR 58602 (September 29, 2014).