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Monday - Friday, 4-7 p.m.
In Depth with Francis Rose features daily interviews with top government executives and contractors. Listen live from 4 to 7 p.m. or download his archived interviews below.
Enforcement of SCRA results in expansive settlement with national lender
Friday - 8/3/2012, 9:09pm EDT
A recent settlement between Capitol One and the Justice Department is one of the most sweeping agreements under a law that protects active-duty military members from losing their homes or paying high credit card interests rates.
Vicky Schultz, Deputy Assistant Attorney General for the Civil Rights Division, told In Depth with Francis Rose that the big lesson from the settlement is that members of the military have rights to protect their finances while they are serving the nation.
The Servicemembers Civil Relief Act prevents banks from foreclosing, repossessing a car or entering any judgments against the soldier or sailor without a court order. They can also reduce car or home loans even credit card interest rates by 6 percent. The Civil Rights Division began its investigation after a serviceman in Arizona complained that Capitol One did not grant him his 2 percent reduction.
"They're focused on serving their country and serving us and we want them to be able to focus," Schultz said. "And while that's happening and they should be given an extra opportunity because they may not be able to get to court and they may have defenses to those debts and those judgments. They should have that due process, that opportunity to be heard and that's why Congress passed this act."
Schultz said the Justice Department expanded its investigation to see if Capitol One made it a habit to ignore the civil relief act and determined that roughly 4,000 members of the military had illegally lost their homes or cars or lost out on cheaper interest rates from the bank, which is one of the country's largest lenders.
The federal regulator that oversees Capitol One, the Office of the Comptroller of the Currency, independently found similar violations of the act as part of a routine investigation to ensure the bank complies with federal laws. The comptroller's office also issued its own order to monitor the bank's compliance, Schultz said.
"It's important that we have vigorous enforcement. We've really tried to step up our compliance with the Servicemembers Civil Relief Act. And this settlement, the Capital One settlement is one of our most sweeping decrees or settlements we've ever obtained," she said.
In addition to the $12 million cash settlement, the bank also agreed to apply the loan reductions to each of the member's loans eliminating the need for members to multiple requests to Capitol One for their car, home or other lines of credit — a concession Schultz called a significant part of the deal.
Schultz told military members that officials will contact them to let know that they are eligible for relief under the settlement. An independent consultant will review all of the bank's lending to identify all service members whose rights were violated.
The Associated Press reported that Capital One will pay $7 million in damages, including at least $125,000 to each service member whose home was unlawfully foreclosed upon and at least $10,000 to each service member whose vehicle was unlawfully repossessed.
Capital One will provide a $5 million fund to compensate service members denied appropriate benefits on credit card accounts, auto and other consumer loans.
The Justice Department is working with the Department of Defense and the newly created Consumer Financial Protection Bureau to get the word out to military members about the 2003 law and their rights, Schultz said.
Capital One to pay $12M in case on servicemen