One of the nation’s largest credit unions will pay $95,000 after a DOJ investigation into the company’s violations of the Servicemembers Civil Relief Act (SCRA).
In other servicemember-related news, the Federal Trade Commission (FTC) announced a proposed rule to implement the Economic Growth, Regulatory Relief and Consumer Protection Act mandate for credit reporting agencies (CRAs) to provide free electronic credit monitoring services for active duty servicemembers.
What happened
Tipped off by two private lawsuits filed in federal court, the DOJ began an investigation into the repossession practices of one of the nation’s largest credit unions. Both plaintiffs alleged that the credit union violated the SCRA by repossessing their vehicles without court orders while they were on active duty and otherwise protected by the statute.
During the course of its inquiry, the DOJ found that the credit union committed seven additional violations, including rejecting servicemembers’ explicit requests for SCRA protection. In one instance, a servicemember and his girlfriend contacted the credit union multiple times to notify the company that he was on active duty in the Army and stationed overseas, but the credit union still repossessed his car while he was serving in South Korea, according to the DOJ’s complaint.
Further, the credit union did not have any written policies or procedures prior to August 2014 addressing the SCRA’s protections against nonjudicial auto repossessions, the DOJ said.
To settle the charges of violating the statute, the credit union agreed to pay $95,000. Of that total, $65,000 will be paid as compensation to the seven servicemembers whose cars it unlawfully repossessed. Six of the servicemembers will receive $10,000, and the seventh will receive $5,000, as that vehicle was repossessed but returned within 24 hours. The remaining $30,000 will be paid to the government as a civil penalty.
In addition, the credit union must submit its employee SCRA training materials for approval and comply with record-keeping and reporting requirements. The credit union has taken steps to repair the credit of the affected servicemembers, the DOJ said.
“Financial institutions must recognize and honor their responsibilities to our men and women in uniform,” Acting Assistant Attorney General John Gore said in a statement about the settlement.
In other SCRA news, the FTC requested comment on a proposed rule requiring the nationwide CRAs to provide free electronic credit monitoring services for active duty military consumers.
Enacted earlier this year, the Economic Growth, Regulatory Relief and Consumer Protection Act required that the agency issue a rule with regard to certain requirements of the law.
Pursuant to the Notice of Proposed Rulemaking (NPRM), the nationwide CRAs would provide a free electronic credit monitoring service that would notify active duty military members within 24 hours of any “material” additions or modifications to their credit files. To take advantage of this service, a servicemember would need to provide contact information, appropriate proof that he or she is an active duty member of the military, and proof of identity.
The rule also set forth specifics about how servicemembers can prove their active duty status (such as by providing a copy of their active duty orders) and prohibited the CRAs from requiring active duty military consumers to agree to terms or conditions and from representing that consumers must purchase a product or service in order to obtain the free credit monitoring service.
In the NPRM, the FTC asked for input on whether the proposed methods used to verify appropriate proof of active duty military status are sufficient and whether the definition of “material additions or modifications” adequately covers the changes to a consumer’s file that require notification. The agency also asked for comment on the costs and benefits of the proposed rule prohibiting CRAs from marketing their services until after an active duty military consumer has indicated an interest in obtaining free credit monitoring service.
Comments will be accepted until January 7, 2019.
To read the DOJ’s complaint, click here.
To read the DOJ’s stipulation of settlement, click here.
To read the FTC’s Federal Register notice, click here.
Why it matters
The DOJ has made SCRA enforcement a priority in recent months, with additional actions against an indirect auto financing company over similar charges of repossessing vehicles without the statutorily mandated court orders as well as a complaint filed against a California-based indirect auto lender.
Protecting servicemembers is one of the least controversial actions regulators take in the marketplace, and we do not foresee any pullback from SCRA enforcement regardless of the political leanings of the appointed regulators.