Recent enforcement activity has demonstrated the agencies have taken to viewing the SCRA as a strict liability statute. This shift in interpretation makes financial institutions legally responsible for compliance with the SCRA. According to Kirk Jensen, Partner in BuckleySandler’s Washington, DC office, “this is a big game changer in how financial institutions react to the SCRA.”
The Department of Justice has had some success in bringing litigation in these matters against the smaller, unsophisticated companies. However, it is important to note that the court is not hearing all the relevant arguments. There has been an uptick in private litigation and some of the issues raised in the enforcement matters may also be raised in court. It is our hope that the defendants will make the relevant arguments to resolve some of the outstanding issues.
Consent orders do not equal the act and the industry will not have concrete answers until the courts resolve the relevant arguments. In the meantime, Jensen recommends the following steps to ensure compliance:
- Develop a procedure for confirming if a customer is in the service or reserve who has received notice. The agencies expect institutions to use the Defense Manpower Data Center (DMDC). Given the DMDC has proven to be notoriously inaccurate, institutions will also want to check other information within the institution such as customer service call logs.
- Implement consistent procedures for determining when someone is eligible for benefits under the SCRA. Institutions will also want to determine what documentation qualifies.
- Design a system to ensure outside counsel is following all requirements, to include completion of all background research and proper notice as expected by the agencies.
- Ensure eviction procedures are compliant. To the extent the institution is relying on waivers, make sure the waivers are satisfying the statute and agency expectations.
Jensen points out those additional benefits to communicate and provide information is not an agency expectation. Your institution will need to determine what is appropriate based on your business model.
Bottom line: Institutions need compliance procedures that take into account the specifications of the statute as well as agency expectations.