The SCRA – What to Do When Compliance is the Only Option
When duty calls, our military members don’t always have the time or means to care for their finances. The Servicemembers Civil Relief Act (SCRA) requires creditors to reduce interest rates on certain loans, prohibits foreclosures without a court order and allows servicemembers to terminate motor vehicle and domicile in certain instances.
Something to come home to.
The SCRA safeguards active duty servicemembers, reservists, active-duty members of the National Guard and, in limited instances, spouses and dependents. It calls for postponing or suspending certain financial obligations taken on before service began and, for a specified period, post-service. This is how financial institutions help our troops maintain their pre-service financial standing so they can come home to something that’s still worthwhile.
Noncompliance has a cost.
SCRA examiners concentrate on key areas; no reduced APR on loans and credit cards, foreclosures without a court order, repossessions, and apartment and vehicle lease terminations. If active members are not properly identified, a financial institution may be liable for fines, penalties and settlements. In today’s pro-service atmosphere, the reputation hit can lead to the loss of current customers and the distancing of new ones.
Although required to inform banks and credit unions of their service status, the onus of identifying active military members and affording them their SCRA protections and benefits falls directly upon the financial institution. When a SCRA request is submitted, it is vital to record where it is routed, who reviews it, who approves benefits and who informs the borrower about request status. Your Compliance Management System (CMS) can help make that happen with effective policies and procedures.
Training—It all begins with knowingwhat to look for and how to proceed. Offer regular SCRA training to employees, especially those extending or servicing loans and credit. They should understand compliance obligations to identify active military and ensure they receive the proper protections and benefits. Then make sure employees have the knowledge and tools to identify qualified servicemembers and their dependents.
Internal Controls—Provide clear policies and procedures for SCRA compliance requirements, servicemember identification, loan documentation and other relevant material that demonstrate your institution is doing all it can to be in compliance with the SCRA.
Monitoring—As with all compliance requirements, regular monitoring is essential to ensure SCRA policies and procedures are effective. With the often unforgiving nature of SCRA exams, internal reviews and audits can be a preemptive strike against noncompliance as they identify policy exceptions requiring corrective action.
Identification—In addition to documentation provided by the servicemember, there are two powerful tools you can easily access to identify and monitor customers eligible for protection; the Defense Manpower Data Center (DMDC) and your Customer Information System (CIS). The DMDC is essential to identify and authenticate status. Your CIS, through onboarding and other customer touchpoints, can identify and flag accounts of servicemembers and their dependents.
Complaints—A clearly documented procedure dedicated to SCRA complaints and their path to resolution may prevent issues from coming under the microscope of examiners and give a heads-up to similar problems.
The Benefit of Outside Compliance Experts
The SCRA is one of our oldest protections acts, with similar temporary statutes initiated as early as the Civil War. Made permanent law in 1940, the Act is often updated and riddled with ambiguities, making it open to interpretation, a recipe for misperception and noncompliance. Understanding and staying up to date with the SCRA create a drain on manpower for an already overworked compliance team. An outside party can help navigate these murky waters and alleviate demands, allowing the team to concentrate on other compliance issues.
Marquis Compliance Professional Services, known for their expertise and personal service, are well-versed in all aspects of compliance, including SCRA requirements. They can perform audits and assessments to ensure you have the necessary policies, processes and procedures in place and define areas that need attention. By utilizing third-party compliance experts, you’ll have a fresh view of your SCRA compliance practices and how to improve them.
Self-identification as active military to financial institution is not always a priority for our servicemembers. However, financial institutions are often answerable for servicemembers not afforded the protection and benefits of the SCRA. A robust CMS with clearly defined SCRA policies and procedures is essential. Third-party experts, like Marquis Compliance Professional Services, can help your bank or credit union stay in compliance and away from violations.