Last October, a report published by the Consumer Financial Protection Bureau (CFPB) recounted how lenders and loan servicers are complying with the Service member’s Civil Relief Act (SCRA). The report recounted complaints that military service members and their families have recently filed with the CFPB regarding lenders’ and servicers’ financial practices.
Based on CFPB reports, over half of all complaints filed with the CFPB by military service members and their families involve mortgages. The majority of these complaints involve loan modification, collection, and foreclosure practices.
SCRA provides a wide range of financial protections for active duty U.S. military service members, Reservists and members of the National Guard who are on active duty. It restricts or limits actions against them in such financial areas as rental agreements, security deposits, evictions, installment contracts, credit card interest rates, mortgages and income tax payments, among others.
The best-known feature of the SCRA is the interest-rate cap, which prohibits lenders from charging more than 6% on debts incurred prior to active duty or activation. According to the CFPB, many service members have to navigate unnecessary hurdles to receive the SCRA interest-rate cap. Specifically, some service members have been told that they need to submit their orders annually to remain eligible for the interest-rate cap. Although the SRCA puts the initial responsibility on the service member to provide proof of eligibility, there is no requirement for a military borrower to inform a servicer at regular intervals of the continuation of active military service. The CFPB further suggests that an annual certification requirement imposed on service members is not a good idea.
So how can lenders monitor a service member’s active-duty status? To facilitate SCRA searches, Department of Defense has developed a secure public internet access system through which any requester can quickly determine whether an individual is currently in the Armed Forces. There is no charge for the online SCRA queries and no specialized authorization, user ID, or password is required. Using this free website (https://www.dmdc.osd.mil/appj/scra), you can submit a single or multiple records request to obtain a report certifying Title 10 active duty status for one or more service members.
Currently, SCRA only provides certain protections to service members for debt existing before entering active duty status. However in May, the House of Representatives passed legislation (H.R. 1842) that would extend SCRA’s foreclosure protection provisions to service members who bought their homes after they went on active duty. The legislation would also subject banks and lenders to enhanced civil penalties for any mortgage-related discrimination violations against service members or their surviving spouses.
Please contact us if you have any questions about SCRA 417-881-0145.