Increasing Scrutiny for SCRA Compliance Violations
Financial services providers across the country are scrambling to avoid being caught in the fallout over the crackdown on violations of the Servicemembers Civil Relief Act (SCRA). Recent fines levied against several credit issuers are an early sign of the increased scrutiny now being focused on everyone from lenders and loan service providers to debt collectors and affiliated agencies.
The SCRA is designed, in part, to reduce interest rates on credit and services and provide protection for members of the military who on active duty. The Consumer Financial Protection Bureau (CFPB), Department of Justice (DOJ) and Federal Deposit Insurance Corporation (FDIC) and other agencies continue to unearth thousands of violations and issue severe and costly penalties against companies found to be in violation of the Act. Just this month, there was a report indicating certain retailers have filed debt collection suits against active duty servicemembers who are unable to defend themselves while serving on active duty. As a result, Senators are now calling on the CFPB to investigate ‘Aggressive Debt Collection’actions against military servicemembers.
SCRA Compliance: Understand the Act
Understandably, financial services and debt collection companies are concerned about how to achieve compliance with SCRA and its many provisions. The best place to start is by understanding The Act itself, which delineates the rights, responsibilities and protections provided for those who enter the military, are called to active duty or are deployed. Provisions of the Act regulate areas such as credit card debt, mortgage payments, student loans, pending trials and taxes.
New Interpretations, New Obligations
Recent government interpretations of the SCRA appear to broaden the acceptable means of communication that can be used to notify creditors about military service. CFPB Monitor commented on the shift:
Now, however, it would appear that any institutional knowledge of military service, whether through a telephone call, written correspondence, or even an email or text communication, obligates a student loan servicer, and by implication, any creditor, to attempt to obtain the necessary written request and military orders or substitutes therefor through the use of the Defense Manpower Data Center. More significantly, the servicer and creditor must provide the 6% interest rate relief even if the servicemember has never submitted any request for such relief.*
In short, financial institutions and creditors are obligated to know a client’s military status and provide the appropriate services at every stage of a financial relationship.
More Information, Faster Responses
As significant as they are, the SCRA investigations cover only one tiny corner of the compliance spectrum. As regulators gain access to more information and increase audits of financial transactions of all kinds, it is critical for every player in the financial services industry to track and monitor every interaction with every client, no matter how large or small.
This kind of continued scrutiny will likely require massive retooling of information and data services as well as increased research and data analytic capabilities across the industry.
As one of the preferred providers of SCRA Scrubs in the industry, Surefire Data Solutions will continue work with organizations to help them maintain SCRA Compliance.