InfoBytes Blog
DOJ resolves SCRA violations with credit union
On March 11, the DOJ announced a settlement with a credit union resolving allegations that the credit union violated the Servicemembers Civil Relief Act (SCRA) by charging excessive interest on servicemembers’ loans and repossessing servicemembers’ cars without first obtaining a court order. According to the DOJ’s complaint, which was filed concurrently with the proposed settlement, the credit union allegedly charged interest exceeding 6 percent to 21 servicemembers who qualified for SCRA interest rate benefits. Under the SCRA, creditors are required to reduce the interest rate on retail installment sales contracts to 6 percent in certain circumstances. However, the DOJ asserted that in at least one instance, a servicemember was told that “reducing the interest rate would increase her monthly payment.” The DOJ also alleged that the credit union repossessed three servicemembers’ vehicles without court orders, including one instance where the vehicle was repossessed from a military base.
The consent order, which is pending court approval, requires the credit union to pay nearly $70,000 to the affected servicemembers, along with a $40,000 civil penalty. The credit union is also, among other things, prohibited from (i) charging interest rate exceeding 6 percent during a period of military service; (ii) reamortizing any retail installment sales contracts connected to a request for SCRA interest rate benefits; (iii) “failing or refusing to credit early alert periods of military service when applying such benefits”; and (iv) repossessing SCRA-protected servicemembers’ vehicles without first obtaining a court order or valid SCRA waiver. The settlement also requires the credit union to review and update its SCRA policies and procedures to prevent future violations and to provide SCRA compliance training to its employees.