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  • DOJ Announces Settlement with Michigan Credit Union over SCRA Violations

    Federal Issues

    On July 6, the DOJ announced a settlement with a Michigan-based credit union resolving allegations that the credit union illegally repossessed four servicemembers’ vehicles in violation of the Servicemembers Civil Relief Act (SCRA). As previously reported, the DOJ filed its complaint on July 26, 2016, alleging that the credit union violated the “SCRA’s prohibition against repossessing a motor vehicle from a servicemember during military service without a court order if the servicemember made a deposit or installment payment on the loan before entering military service.”

    Servicemember protections under the SCRA empower the court to (i) review and approve each repossession; (ii) delay a repossession or require the lender to refund the payments made by the servicemember prior to the repossession; (iii) appoint an attorney to represent the servicemember; and (iv) require the lender to post bond with the court.

    Under the settlement, the credit union agreed to a civil penalty of $5,000. In addition, the credit union agreed to pay up to $10,000 plus lost equity in the vehicle with interest and to repair the credit of each affected servicemember whose vehicle was repossessed. The credit union also agreed to obtain either a court order or a valid SCRA waiver before repossessing a servicemember’ s vehicle, and to develop policies and procedures for vehicle repossessions that comply with the SCRA as well as provisions to ensure that servicemembers may benefit from the 6 percent interest rate cap on vehicle loans.

    Federal Issues DOJ Credit Union SCRA Courts Settlement Servicemembers

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  • Texas Governor Passes Legislation Related to Vehicle Installment Contracts, Documentary Fees, and Deferred Presentment Transactions for Military Borrowers

    State Issues

    On June 9, Texas Governor Greg Abbott signed legislation (H.B. 2339) amending the state’s Finance Code provisions governing trade-in credit agreements related to motor vehicle retail installment contracts. The law now authorizes a seller—upon execution of a contract—to offer to sell to a buyer a “trade-in credit agreement,” which is “a contractual arrangement under which a retail seller agrees to provide a specified amount as a motor vehicle trade-in credit for the diminished value of the motor vehicle that is the subject of the retail installment contract in connection with which the trade-in credit agreement is offered if the motor vehicle is damaged but not rendered a total loss as a result of a collision accident, with the credit to be applied toward the purchase or lease of a different motor vehicle from the retail seller or an affiliate of the retail seller.” Specifically, a trade-in credit agreement is separate from a retail installment contract, not a term of the retail installment contract, and not insurance. The law further outlines changes related to the amount charged for a trade-in credit agreement as well as terms and conditions of the retail installment contract. The law takes effect September 1, 2017.

    On June 15, the governor signed legislation (H.B. 2949) relating to the maximum amount a retail seller of motor vehicles can charge for a documentary fee. Under the changed provisions, a seller is now required to provide written notice to the finance commission of the amount it intends to charge unless the documentary fee is considered reasonable, which is established as an amount “less than or equal to the amount of the documentary fee presumed reasonable . . . by rule of the finance commission.” In determining whether a fee is reasonable, the commissioner considers the resources a retail seller may need to employ to perform its duties when handling and processing documents related to the sale and financing of the vehicle. The law takes effect September 1, 2017.

    Separately on June 15, the governor signed legislation (H.B 2008) amending the Texas Finance Code to require a lender that enters into a deferred presentment transaction with a military servicemember or a dependent of a servicemember to comply with the Military Lending Act (MLA) (10 U.S.C. § 987) and its implementing regulation. The MLA prohibits creditors from extending consumer credit if the “creditor rolls over, renews, repays, refinances, or consolidates any consumer credit extended to the covered borrower by the same creditor with the proceeds of other consumer credit extended by that creditor to the same covered borrower.” Creditors engaged in deferred presentment transactions or similar payday loan transactions are subject to these limitations “provided however, that the term does not include a person that is chartered or licensed under Federal or State law as a bank, savings association, or credit union.” The law takes effect September 1, 2017.

    State Issues State Legislation Auto Financing Military Lending Act Servicemembers

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  • Florida Attorney General Rolls Out Military Consumer Protection Program; CFPB Publishes Annual Servicemember Report

    Consumer Finance

    On May 17, Attorney General Pam Bondi announced a new consumer protection program designed to spread awareness and help prevent deceptive business practices affecting military and veteran communities. The Military and Veterans Assistance Program (MVAP) will provide resources and information to consumers on emerging scams and other consumer protection related issues, as well as encourage open communication among local, state, and federal partners to help ensure complaints are handled appropriately.

    On May 16, the CFPB’s Office of Servicemember Affairs (OSA) published its fifth annual servicemember report, The Office of Servicemember Affairs: Charting our course through the military lifecycle, and a follow-up blog post outlining the work the office has conducted over the past five years and the work it intends to do in the future. The structure of the report—designed to be presented within the construct of the “military lifecycle”—presents the ways that “many common and some uniquely-military consumer issues . . . fit within that continuum.” Under the Dodd-Frank Act, OSA monitors servicemember complaints about consumer financial products or services and coordinates with the efforts of federal and state agencies to improve measures and provide assistance. As of April 1, 2017, the OSA reports that it has handled approximately 74,800 complaints submitted by servicemembers, veterans, and their families since July 2011, of which 42 percent related to debt collection, 18 percent to mortgages, and 11 percent to credit reporting. In total, the OSA claims it has provided approximately $3.3 million in monetary relief to military consumers who submitted complaints to the CFPB.

    Consumer Finance State AG Consumer Education Servicemembers

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  • New York AG Announces Settlement with Virginia Developer for Violating Servicemembers Civil Relief Act

    Federal Issues

    On May 10, New York Attorney General Eric T. Schneiderman announced that a Virginia-based company has agreed to pay $69,000 to settle allegations that, among other things, it violated the Servicemembers Civil Relief Act (SCRA) by unlawfully charging fees to servicemembers who terminated their residential leases early. Under the provisions of the SCRA, servicemembers and their families are allowed to terminate leases early without penalty if they are deployed, receive orders for permanent change of station, or their military service is honorably terminated. According to the Attorney General’s office, the company—which owns a community of townhomes in close proximity to Fort Drum and actively markets its housing to servicemembers and their families—also violated New York law by including “numerous unconscionable provisions” in its lease agreements, and advertising amenities that were either not included in the rent, or unavailable. Under the terms of the settlement, the company must pay more than $59,000 to over 125 servicemembers, reform its lease and other business practices to comply with New York law, and pay a civil money penalty of $10,000 to the State.

    Federal Issues Consumer Finance SCRA Servicemembers State AG

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  • GAO Issues Report on Compliance with the SCRA Interest Rate Cap by Student Loan Servicers

    Federal Issues

    On November 18, the GAO announced the release of its report and recommendations following the watchdog agency’s review of application of the SCRA’s rate cap by student loan servicers. According to the report, entitled Student Loans: Oversight of Servicemembers' Interest Rate Cap Could Be Strengthened, the number of servicemembers receiving the interest rate cap for their student loans has greatly increased since the Department of Education began requiring federal student loan servicers to automatically check the Department of Defense’s SCRA database to identify those who are eligible.

    The report also identified several challenges commonly encountered by servicemembers seeking to take advantage of the rate cap, including:  (i) inaccurate SCRA information from the database; (ii) lack of a requirement that private loan servicers use the automatic eligibility check to identify eligible servicemembers; and (iii) lack of routine oversight of SCRA compliance for nonbank private student loan lenders and servicers. The GAO recommended, among other things, that the DOJ require private loan servicers to use the automatic eligibility check to identify eligible borrowers. The report also highlighted an issue with the Department of Education’s new borrower complaint system, which lacks the ability to track SCRA complaints systematically.

    Federal Issues Consumer Finance Servicemembers Student Lending SCRA GAO Department of Education DoD

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  • CFPB Releases “Snapshot of Servicemember Complaints”

    Consumer Finance

    On November 14, the CFPB announced the release of its annual review of issues related to mortgage financing programs offered by the U.S. Department of Veterans Affairs, entitled A Snapshot of Servicemember Complaints. According to the report, as of November 1, the CFPB has received over 12,500 mortgage complaints from servicemembers, veterans, and their dependents, with the CFPB identifying at least 14% (about 1,800) of those complaints relating to refinancing. The complaints concerned a wide range of issues, including aggressive solicitations, misleading advertisements, processing delays that resulted in less favorable terms than expected, a lack of clarity in loan documents, and poor communications during refinancing that resulted in customer confusion.

    Consumer Finance CFPB Servicemembers Miscellany VA

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  • CFPB Issues Annual Complaint Report Specific to the Military Community

    Consumer Finance

    On March 22, the CFPB released its fourth annual report highlighting complaints the agency received in 2015 from servicemembers, veterans, and their families. According to the report, debt collection complaints continue to be the most common. The report states that, between January 1, 2015 and December 31, 2015, the CFPB received more than 19,000 complaints from the military community, 46% of which related to the debt collection industry. Complaints related to mortgages and credit reporting follow at 15% and 11%, respectively. The report also summarizes four public enforcement actions in 2015, noting that the actions provided servicemembers with more than $5 million in refunds and other relief.

    CFPB Servicemembers Debt Collection Consumer Complaints

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  • Congress Passes Bill to Extend Foreclosure Protection Element of the SCRA

    Lending

    On March 21, the U.S. House of Representatives passed S.B. 2393, which extends through 2017 the provision of the Servicemembers Civil Relief Act’s (SCRA) that protects servicemembers against foreclosure without a court order or waiver for one year following completion of their service. On January 1, 2016, the foreclosure protection provision reverted back to the period of active duty military service plus 90 days, rather than the period of active duty military service plus one year. Upon the President’s signature, the SCRA’s protection against foreclosure without a court order or waiver will return to the period of active duty military service plus one year through December 31, 2017.       

    Foreclosure Servicemembers SCRA U.S. Senate U.S. House

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  • New York AG Announces Settlement Payments to Consumers Affected by Alleged Predatory Lending Scheme

    Consumer Finance

    On December 22, New York AG Schneiderman announced that more than 3,000 consumers received partial compensation from funds stemming from a global settlement negotiated by AG Schneiderman and the CFPB. In July 2014, the CFPB and 13 state AGs announced a consent order with a military consumer lender requiring it to provide $92 million in debt relief to approximately 17,000 U.S. servicemembers and other consumers affected by the company’s alleged predatory lending scheme. At the time of the order, the company was in Chapter 7 bankruptcy and the redress requirement was suspended until it complied with the debt-relief provisions of the consent order. The recent redress payment exceeds $3.7 million and was issued to 82 victims in New York.

    CFPB Servicemembers State AG

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  • FTC Signs Memorandum of Agreement to Prevent Fraudulent and Deceptive Practices Against Servicemembers

    Consumer Finance

    On November 12, the FTC announced that it signed a Memorandum of Agreement with the Veterans Administration (VA) to provide mutual assistance in preventing fraudulent and deceptive acts by “institutions of higher learning and other establishments that offer training” targeting U.S. servicemembers, veterans, and dependents using military education benefits. In its press release, the FTC warned servicemembers of for-profit schools that may make unrealistic promises and pressure them to enroll in unnecessary courses or take out loans they may not be able to pay off.

    FTC Servicemembers

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