At a time when media reports trumpet eight- and nine-figure financial penalties for foreign-bribery, sanctions, or other major legal violations, it is important for companies to remember that their corporate compliance programs need to cover not just the highest-visibility legal fields, but all laws and regulations to which they are subject. Some regulatory fields may carry less onerous penalties, and yet serve important public-policy objectives.
One such field is the Servicemembers Civil Relief Act. Now nearly two decades old, the SCRA is a federal law directed at easing financial burdens on servicemembers during their periods of military service. It provides benefits and protections for military members as they enter active duty, and for servicemember dependents. In particular, it covers issues such as rental agreements, security deposits, prepaid rent, evictions, installment contracts, credit card interest rates, mortgage interest rates, mortgage foreclosures, civil judicial proceedings, automobile leases, life insurance, health insurance and income tax payments. Violations of the SCRA can result in the U.S. Department of Justice filing a civil suit to obtain not just civil penalties, equitable relief, and declaratory relief, but also monetary damages on behalf of individual servicemembers.
On March 11, the Justice Department announced that it had obtained a settlement agreement requiring BayPort Credit Union (BayPort) to pay nearly $110,000 to resolve allegations that BayPort violated the SCRA by charging excessive interest on servicemembers’ loans and repossessing servicemembers’ cars without court orders. The settlement, which resolved a civil lawsuit that the Department had brought, must be approved by the U.S. District Court for the Eastern District of Virginia.
According to the Department, the lawsuit alleges that BayPort unlawfully charged interest in excess of 6 percent to 21 servicemembers who qualified for and sought SCRA interest rate benefits. In at least one instance, BayPort allegedly told a servicemember “that reducing the interest rate would increase her monthly payment.” The lawsuit further alleges that BayPort unlawfully repossessed three servicemembers’ motor vehicles without court orders. In at least one of those cases, BayPort reportedly knew about the borrower’s military service, but repossessed the vehicle from a military base.
Under the terms of this settlement, BayPort must pay nearly $70,000 to the affected servicemembers and $40,000 to the United States as a civil penalty. The agreement with the Department also requires that BayPort “revise its policies and procedures to prevent future SCRA violations and provide SCRA training to its employees.”
Although the BayPort settlement involved only modest penalties, it attracted attention not just regionally but internationally. Compliance officers at financial institutions should therefore use this settlement in internal briefings and trainings, to emphasize to business executives the importance of maintaining sound compliance programs across the board.