Pub. 7 2017-2018 Issue 4

O V E R A C E N T U R Y : B U I L D I N G B E T T E R B A N K S - H E L P I N G C O L O R A D A N S R E A L I Z E D R E A M S January • February 2018 13 S oldiers from the Civil War under Grant to currently deployed troops in Afghanistan have rested under the umbrella of federal legislation protecting their financial welfare while serving, though I can’t imagine that is any semblance of consideration for the sacrifices they make. In 1948 the Supreme Court added texture to the legislative predecessor of the Servicemembers Civil Relief Act (SCRA): “The Act should be read with an eye friendly to those who dropped their affairs to answer their country's call.” LeMaistre v. Leffers, 333 U.S. 1, 6 (1948). Seven decades, incalculable wars, and scores of unrefined lawmakers later, the umbrella is once again in the spotlight . In October of this year the Consumer Financial Protection Bureau (CFPB) published a nation-wide snapshot focused exclusively on servicemember complaints. Statistics in the report reflect a consistently upward trend in servicemember complaints filed with the CFPB, with two categories of com - plaints pulling in the largest number: debt collection and mortgages. The previous month the Federal Trade Commis- sion (FTC) launched a dedicated website for its newly-created Military Task Force, which followed two summits earlier this year hosted by the commission and dedicated entirely to dis- cussing and addressing servicemember financial challenges. A current senior official at the Office of the Comptroller of Currency (OCC) emphasized in a speech to military bankers last August that banks should expect to be held accountable for violations. When the regulations are violated, both banks and ser- vicemembers suffer the consequences; when the regulations are followed, landmines become goldmines for both the bank and the servicemember. To effect that conversion, banks must accomplish three objectives: (1) understand the various regulations; (2) evaluate bank compliance; and (3) implement missing compliance policies and procedures. Regulatory Perimeter The primary components of military lending regulation are the SCRA; Military Lending Act (MLA); Dodd-Frank prohibitions on unfair, deceptive, and abusive acts and prac- tices (UDAAP); and state laws. Agencies including the CFPB and DOJ have filed suits against financial institutions for violations of these rules and secured consent agreements or court verdicts penalizing the institutions with civil fines up to $30 million. In 2016 Navy Federal Credit Union paid $23 million in restitution to consumers and a $5.5 million civil penalty for UDAAP violations consisting of training deficiencies and collection attempts threatening to contact servicemember commanding officers. Of note in the case, the CFPB found that these collection attempts were deceptive despite the ser- vicemember having signed an account agreement expressly providing permission to contact a commanding officer because the language was buried in fine print, non-negotiable, and not bargained for. The previous year, Santander and Bank of America felt the sting of multi-million dollar civil money penalties resulting from violations of the SCRA. The DOJ website boasts of awards in cases against financial institutions as recent as September ranging from just over $1,000 to just under $1 million. The cases include violations of the SCRA by lenders who repossessed servicemember vehi- cles. Recent private actions against banks by servicemembers include liability for foreclosure, repossession, and interest rate violations. SCRA Unlike other regulations that target specific areas of a bank, the SCRA is broad with provisions penetrating multiple departments and product lines. The Act primarily covers active duty military and their dependents; in limited circumstances business agreements are covered. Violations are subject to enforcement actions, civil penalties, and private suits. The SCRA piles on with criminal penalties for several violations, making the stakes even higher for bankers. The crown jewel in the Act for new servicemembers is the interest rate cap of 6% on all loans (including mortgages) con- summated before entering military service. Servicemembers must expressly invoke this right within 180 days of release from the military. You read that correctly – the regulation permits retroactive interest reduction. Calculation of the interest rate is unique and can be tricky. The SCRA, among other things, also provides protec- tions against default judgment, rights to terminate leases, judicial stays or extensions, revised statutes of limitation,   continued on page 14