Over the past several years, the Department of Justice has been vigorously pursuing banks and other financial institutions that have violated the SCRA (the “Act”). Some of the provisions of settlement agreements have included burdens and standards that exceed those currently required under the Act. In December, 2015, the DOJ submitted to Congress SCRA legislation proposed to codify some of the provisions of those settlement agreements. You can download the recommendations here.
The current Act, at Section 3937(b)(1) (note that the Act’s numbering system changed in late 2015. Here is a CHART that correlates the numbering systems. It requires that, in order to take advantage of the 6% interest rate cap, a servicemember must request so in writing and must produce “a copy of orders calling him or her to active duty service.” DOJ’s packet proposes a change so that lenders would be required to accept and keep track of oral requests for the reduction. Once an oral request is made, the lenders would be required to confirm the military status and, if there is a confirmation, the interest rate would have to be rolled back as of the Active Duty Status Date.
The proposal also would loosen the definition of “copies of orders” to allow servicemembers to show other documentation, besides actual “copies of orders” to demonstrate active military status, such as any “notification, certification, or verification from the Secretary [of Defense] or the servicemember’s commanding officer.”
The Servicemembers Civil Relief Act Affidavit (which has many other names, such as Military Affidavit, Non-military Affidavit, and Military Status Affidavit) is usually required by the Courts before a default judgment is entered. Rather than this continuing as a requirement imposed by the courts, the DOJ proposal would shift the requirement to the Plaintiff and require the Plaintiff to review both the DMDC database and whatever information may be in the Plaintiff’s files. We are not sure what practical effect this proposed change would have, since this seems to be commonplace practice, already.
If a defendant is on active military duty, the courts are to appoint counsel, under Section 3931 of the Act. The DOJ proposal would require certain minimum efforts by appointed counsel, including contacting their clients, obtain a stay, and advocating for adjustments to obligations. Again, there appears to be no difference between these proposed requirements and the minimum level of effective representation one would expect from counsel. The proposals as well as the Act are silent as to where the funding would come from for this representation.
Installment sales and repossessions, including vehicles, are protected under Section 3952 of the Act which, as most provisions, only covers contracts dated before active military service begins. The current act proscribes termination and repossession before or during the term of active duty. The proposed change would extend those protections for a year after Termination of Active Duty. It is interesting to note that the Act protects against foreclosure (which is arguably a more severe threat than vehicle repossession) for only 90 days after Termination of Active Duty (note this article was written in March of 2016). Various amendments had extended that protection for a full year, but those amendments have since expired and, despite proposed and pending bills, the protection period has returned to the 90-day period originally written into the SCRA.
The DOJ also proposes increasing its authority and doubling the civil fines for violations of the SCRA to $110,000 for the first violation and $220,000 for subsequent violations.