There are several laws that regulate lending to servicemembers. Violations of the law can lead to considerable liability and to serious reputation risk (see the discussion about Chase Bank below). Most financial institutions have not been overly concerned about servicemember lending regulations because the federal financial institution regulatory agencies have been asleep at the switch on this issue. Could it be that the slumbering giants are awakening?
Office of Servicemember Affairs
On January 6, 2011 the U.S. Department of the Treasury today announced the selection of Holly Petraeus to establish the Office of Servicemember Affairs being built by the Consumer Financial Protection Bureau (CFPB).
The Dodd-Frank Wall Street Reform and Consumer Protection Act requires the creation of the Office of Servicemember Affairs (OSA) within the CFPB. The OSA is working in partnership with the Department of Defense to help ensure that: military families receive the financial education they need to make the best financial decisions for them; complaints and questions from military families are monitored and responded to; and federal and state agencies coordinate their activities to improve consumer protection measures for military families.
Who is Holly Petraeus?
• Previously served as the director of the Better Business Bureau’s Military Line program, a partnership with the Department of Defense Financial Readiness Campaign to provide consumer education to active and retired servicemembers and their families.
• Is the daughter of Army Gen. William A. Knowlton, a previous superintendent of West Point. Her son, brother, grandfather, and great-grandfather all served in the armed forces.
• Is the wife of Army Gen. David Petraeus, current Commander of the International Security Assistance Force in Afghanistan and former Commander of the U.S. Central Command.
• Is a former Army civilian employee. She has extensive experience as a volunteer leader in military family programs, working with local, state, and national legislators on issues affecting Army families and testifying at Congressional hearings on deployment-related issues.
Last year, a class action lawsuit was filed against JP Morgan Chase Bank by servicemembers alleging violations of the Servicemembers Civil Relief Act. The lawsuit was filed by Marine Captain Jonathan Rowles after his unsuccessful attempt to resolve his mortgage issues with Chase. Rowles, as required by the SCRA, provided Chase with a written request seeking a reduction in his interest rate and a copy of his active-duty orders.
Captain Rowles battled Chase five years. During those years he also fought the Taliban in Afghanistan. After Rowles sued Chase, and Chase’s SCRA violations became public knowledge, other service members with Chase mortgages began raising claims regarding Chase’s unlawful practices.
As a result of the negative publicity, Chase recently admitted that it had illegally foreclosed on 18 active-duty service members and overcharged 4,500. Chase has made a public apology for its wrongdoing in testimony before the House Veterans Affairs committee in Washington. Chase also agreed to refund $2 million in interest and other fees it wrongfully charged service members. Military families claim that the money is not sufficient to compensate them for the harm they have sustained, having been repeatedly harassed, badgered, and threatened by Chase.
So, why are these events important?
Chase’s screw up placed a big spotlight on the issue of lending to servicemembers. Mrs. Petraeus’ appointment places another spotlight on servicemember issues. It appears that the CFPB is responding to servicemember issues. Will the other federal financial institution regulatory agencies wake up as well?