DOJ ANNOUNCES ALMOST 78,000 SERVICE MEMBERS WILL RECEIVE COMPENSATION FOR EXCESS INTEREST ON STUDENT LOANS BY NAVIENT CORP.

FROM:  U.S. JUSTICE DEPARTMENT
Thursday, May 28, 2015
Nearly 78,000 Service Members to Begin to Begin Receiving $60 Million Under Department of Justice Settlement with Navient for Overcharging on Student Loans

The Department of Justice announced today that this June, 77,795 service members will begin receiving $60 million in compensation for having been charged excess interest on their student loans by Navient Corp., the student loan servicer formerly part of Sallie Mae.  The payments are required by a settlement that the department reached with Navient last year to resolve the federal government’s first ever lawsuit filed against owners and servicers of student loans for violating the rights of service members eligible for benefits and protections under the Servicemembers Civil Relief Act (SCRA).  The United States’ complaint in that lawsuit alleged that three defendants (collectively Navient) engaged in a nationwide pattern or practice, dating as far back as 2005, of violating the SCRA by failing to provide members of the military the 6 percent interest rate cap to which they were entitled for loans that were incurred before the military service began.  The three defendants are Navient Solutions Inc. (formerly known as Sallie Mae, Inc.), Navient DE Corporation (formerly known as SLM DE Corporation), and Sallie Mae Bank.

The settlement covers the entire portfolio of student loans serviced by, or on behalf of, Navient.  This includes private student loans, Direct Department of Education Loans, and student loans that originated under the Federal Family Education Loan (FFEL) Program.  Approximately 74 percent of the $60 million that is about to be distributed is attributable to private loans, 21 percent to loans guaranteed by the Department of Education and five percent to loans owned by the Department of Education.

The checks, which are scheduled to be mailed on June 12, 2015, will range from $10 to over $100,000, with an average of about $771.  Check amounts will depend on how long the interest rate exceeded 6 percent and by how much, and on the types of military documentation the service member provided.

In addition to the $60 million in compensation, the settlement contains several other key provisions.  It required Navient to pay the United States a civil penalty of $55,000.  Navient must also request that all three major credit bureaus delete negative credit history entries caused by the interest rate overcharges and improper default judgments.

The settlement also required Navient to streamline the process by which service members may notify Navient of their eligibility for SCRA benefits.  The revised process includes an SCRA online intake form for service members, and the availability of customer service representatives specially trained on the rights of those in military service.

“This compensation will provide much deserved financial relief to the nearly 78,000 men and women who were forced to pay more for their student loans than is required under the Servicemembers Civil Relief Act,” said Acting Associate Attorney General Stuart F. Delery.  “The Department of Justice will continue using every tool at our disposal to protect the men and women who serve in the Armed Forces from unjust actions and illegal burdens.”

“We are pleased about how quickly we will be able to get this money back into the hands of the service members who were overcharged on their student loans while they were in military service,” said Principal Deputy Assistant Attorney General Vanita Gupta of the Civil Rights Division.  “The department will continue to actively protect our service members and their families from such unjust actions.”

The department’s investigation of Navient was the result of a referral of service member complaints from the Consumer Financial Protection Bureau’s Office of Servicemember Affairs, headed by Holly Petraeus.  The Department of Justice worked closely with the department of Education during the investigation to ensure that aggrieved service members with federally owned and federally guaranteed student loans would be fully compensated, and be able to receive the SCRA benefit of a reduced 6 percent interest rate through a streamlined process going forward.  The Department of Education is now using a U.S. Department of Defense database to proactively identify borrowers who may be eligible for the lower interest rate under the SCRA, rather than requiring service members to apply for the benefit.

STORAGE COMPANY SUED BY DOJ FOR SELLING SERVICE MEMBERS' PERSONAL PROPERTY

FROM:  U.S.  JUSTICE DEPARTMENT
Monday, March 16, 2015
Department of Justice Files Suit Against Storage Company for Unlawfully Selling Service Members' Belongings

The Department of Justice has filed a lawsuit to recover damages from a storage company that allegedly violated the Servicemembers Civil Relief Act (SCRA) when it sold service members’ personal property without obtaining the necessary court orders.  The defendants in this lawsuit are Daniel E. Homan and Horoy Inc., doing business as Across Town Movers—a San Diego, California, storage company.  Homan is the President and sole owner of Horoy Inc.

The SCRA protects the rights of service members while on active duty by suspending or modifying certain civil obligations.  The law states that a storage lien may not be enforced against service members during, or 90 days subsequent to, their period of military service without a court order.  The Department of Justice’s complaint alleges that, since 2011, Across Town Movers sold the personal property of 11 service members without obtaining a required court order.

The complaint further alleges that after illegally selling one of the service member’s personal property, Across Town Movers continued to receive regular payments from the United States for storage of the sold property.  That service member is U.S. Navy Master Chief Petty Officer Thomas E. Ward.

In 2006, Master Chief Ward, a 30-year veteran, was deployed overseas.  He placed his valuable car parts and many household items into storage, and entrusted Across Town Movers to keep his personal property safe until he returned.  Just before he returned home, he learned that Across Town Movers had auctioned all of his stored personal property, including vintage original car parts.

“Federal law does not allow storage companies to sell the contents of a service member’s storage lot without a court order,” said Acting Assistant Attorney General Vanita Gupta of the Civil Rights Division.  “Storage companies should check the Defense Department’s military database and other resources before conducting any auction to see if the customer is protected by the Servicemembers Civil Relief Act.  The Department of Justice is committed to protecting the rights of the men and women who serve in our Armed Forces and we will continue to devote time and resources to make sure that they are given the legal protections they deserve.”

“Service members, especially when deployed overseas, should be able to focus on protecting our county and shouldn’t have to worry about losing their personal property,” said U.S. Attorney Laura E. Duffy of the Southern District of California.  “Congress enacted the SCRA for this purpose, and we will pursue all appropriate remedies to ensure that our service members’ rights are protected.  Whether large or small, businesses will be held accountable for violating those rights.”

In addition to seeking damages for the value of the auctioned goods, the SCRA provides for civil monetary penalties of up to $55,000 for the first offense and $110,000 for each subsequent offense.  The Department of Justice will also seek injunctive relief.

This lawsuit was filed today in the Southern District of California.  This matter resulted from a referral to the Justice Department by the U.S. Navy.

Service members and their dependents who believe that their SCRA rights have been violated should contact the nearest Armed Forces Legal Assistance Program office.  Office locations may be found at http://legalassistance.law.af.mil/content/locator.php.  Additional information on the Justice Department’s enforcement of the SCRA and other laws protecting service members is available at www.servicemembers.gov.

This matter is being handled by Assistant U.S. Attorneys Dylan M. Aste and Leslie M. Gardner of the Southern District of California.

FDIC, SALLIE MAE SETTLE DECEPTIVE PRACTICES ALLEGATIONS RELATED TO STUDENT LOANS

FROM:  U.S. FEDERAL DEPOSIT INSURANCE CORPORATION 

The Federal Deposit Insurance Corporation (FDIC) today announced a settlement with Sallie Mae Bank, Salt Lake City, Utah, and Navient Solutions, Inc. (formerly known as Sallie Mae, Inc.), subsidiaries of SLM Corporation and Navient Corporation, respectively, and herein collectively referred to as Sallie Mae, for unfair and deceptive practices related to student loans in violation of Section 5 of the Federal Trade Commission Act (Section 5) and for violations of the Servicemembers Civil Relief Act (SCRA).

This action results from an examination of Sallie Mae by the FDIC regarding Sallie Mae's compliance with federal consumer protection statutes, including Section 5 and SCRA, and a companion investigation by the Department of Justice (DOJ) related to the treatment of servicemembers. As part of the settlement, Sallie Mae stipulated to the issuance of Consent Orders, Orders for Restitution, and Orders to Pay Civil Money Penalty (collectively, FDIC orders). The FDIC orders require these entities to pay civil money penalties totaling $6.6 million, to pay restitution of approximately $30 million to harmed borrowers and to fund a $60 million settlement fund with the DOJ to provide remediation to servicemembers. The DOJ has also taken separate action against the entities with regard to violations of the SCRA.

The FDIC determined that Sallie Mae violated federal law prohibiting unfair and deceptive practices in regards to student loan borrowers through the following actions:

Inadequately disclosing its payment allocation methodologies to borrowers while allocating borrowers' payments across multiple loans in a manner that maximizes late fees; and Misrepresenting and inadequately disclosing in its billing statements how borrowers could avoid late fees. The FDIC determined that Sallie Mae violated federal laws regarding the treatment of servicemembers (SCRA and Section 5) through the following actions:

Unfairly conditioning receipt of benefits under the SCRA upon requirements not found in the Act;
Improperly advising servicemembers that they must be deployed to receive benefits under the SCRA;
Failing to provide complete SCRA relief to servicemembers after having been put on notice of these borrowers' active duty status.

In addition to the payment of restitution to harmed borrowers and a civil money penalty, the FDIC orders require Sallie Mae to take affirmative steps to ensure that disclosures regarding payment allocation and late fee avoidance are clear and conspicuous, that servicemembers are properly treated under the SCRA, and that all residual violations be remedied to ensure compliance with applicable laws.

DEBT PROTECTION FOR SERVICEMEMBERS

FROM: U.S. DEPARTMENT OF DEFENSE

Servicemembers' Civil Relief Act provides debt protection
by Christoph Mlinarchik and Capt. Patrick Clary
21st Space Wing Base Legal Office
8/23/2012 - PETERSON AIR FORCE BASE, Colo. -- According to the U.S. Supreme Court, the purpose of the Servicemembers' Civil Relief Act is to protect "those who dropped their affairs to answer their country's call." SCRA extends the protection of the Soldiers' and Sailors' Civil Relief Act of 1940, which covered a wide range of topics such as foreclosures, evictions, rental agreements, installment contracts, credit card and mortgage interest, civil litigation and income tax.

The policy of SCRA is to ensure those who serve and protect their nation are not unfairly penalized in their private lives by the challenges of military duty. SCRA applies to active duty military members, Reservists, and members of the National Guards. Military life sometimes creates obstacles for military service members to deal with personal, financial, legal and residential aspects of daily life. This article highlights three major SCRA benefits: 6 percent interest rates, terminations of leases, and protections in judicial proceedings.

Section 207 of SCRA mandates that debts incurred prior to entry to active duty must be lowered to no more than 6 percent. This applies to consumer debt, mortgage interest rates, and private student loans but not public, federally-insured student loans. To activate this protection, write a letter to the creditor requesting immediate reduction of the interest rate to 6 percent, and include a short statement of how the service member has been materially affected by military service with a copy of the orders to active duty. Any difference between the higher interest rate and 6 percent will be forgiven and need not be repaid. These benefits can save thousands of dollars over the life of a loan. Remember, this only applies to preservice debt, not debt accrued during military service.

SCRA Section 305 governs terminations of both housing and automobile leases. After receiving permanent change of station or deployment orders for 90 days or more, SCRA allows terminations of housing leases without penalty. All that is needed is written notice to the landlord along with a copy of the orders.

For automobile leases, leases signed before service can be canceled after receiving active duty orders for 180 days or more. If the automobile lease was signed after active duty began, it can be terminated upon receiving PCS orders to a location outside the continental United States or deployment orders for 180 days or more. Remember these termination rights can be waived. Be sure to check lease agreements for SCRA waivers and request any such language be removed before final signature. If you have any questions about language in your lease, stop by the legal office and have an attorney give you an opinion before signing it.

Due to ongoing duties, deployments and PCS orders, attending court in distant locations is not always feasible. If a defendant in a civil proceeding does not show up to court, the judge may automatically find in favor of the plaintiff, which is called a default judgment. To protect military personnel from default judgments, SCRA Section 201 mandates default judgments entered against service members during active duty or within 60 days thereafter be reopened and set aside. Request relief from the court within 90 days of the end of military service to invoke SCRA Section 201.


SCRA Section 202 provides for delays in court or administrative proceedings for those serving on active duty. The proceeding will be postponed for at least 90 days upon receipt of a written request. The request must include an explanation of how military duty affects the service member's ability to appear in court, a date when the service member can appear, and a letter from the commander stating that duty precludes appearance in court. Beyond the mandatory 90 days, further delays may be granted at the court's discretion. If further delays are denied in the service member's absence, an attorney will be appointed to represent the service member in absentia.

Contact a legal assistance attorney in the 21st Space Wing Base Legal Office for further questions or legal assistance regarding the SCRA. Legal assistance walk-in hours are 8-9 a.m. Monday and Wednesday, and from 1-2 p.m.Tuesday and Thursday.

CAPITAL ONE REACHES SETTLEMENT ON ALLEGED VIOLATIONS OF SERVICEMEMBERS CIVIL RELIEF ACT

FROM: U.S. DELPARTMENT OF JUSTICE
Thursday, July 26, 2012

Justice Department Reaches $12 Million Settlement to Resolve Violations of the Servicemembers Civil Relief Act by Capital One

Capital One N.A. and Capital One Bank (USA) N.A. (together Capital One), have agreed to pay approximately $12 million to resolve a lawsuit by the Department of Justice alleging the companies violated the Servicemembers Civil Relief Act (SCRA), the Justice Department announced today. The settlement covers a range of conduct that violated the protections guaranteed service members by the SCRA, including wrongful foreclosures, improper repossessions of motor vehicles, wrongful court judgments, improper denials of the 6 percent interest rate the SCRA guarantees to service members on some credit card and car loans and insufficient 6 percent benefits granted on credit cards, car loans and other types of accounts. The proposed consent order, which was filed simultaneously with the complaint, is one of the most comprehensive SCRA settlements ever obtained by a government agency or any private party under the SCRA.

"Today’s action makes clear that the Justice Department will fight for our service members, and use every available tool, resource and authority to hold accountable those who engage in discriminatory practices targeting those who serve," said Attorney General Eric Holder. "Every day, our brave men and women in uniform make tremendous sacrifices to protect the American people from a range of global threats – and my colleagues and I are determined to ensure that they receive our strongest support here at home."

The agreement requires Capital One to pay approximately $7 million in damages to service members for SCRA violations, including at least $125,000 in compensation plus compensation for any lost equity (with interest) to each servicemember whose home was unlawfully foreclosed upon, and at least $10,000 in compensation plus compensation for any lost equity (with interest) to each servicemember whose motor vehicle was unlawfully repossessed. In addition, the agreement requires Capital One to provide a $5 million fund to compensate service members who did not receive the appropriate amount of SCRA benefits on their credit card accounts, motor vehicle finance loans and consumer loans. Any portion of the $5 million that remains after payments to service members are made will be donated by Capital One to one or more charitable organizations that assist service members.

"This settlement demonstrates that the Justice Department will take any and all actions to ensure that the rights of service members are protected. We rely on these brave men and women to protect the safety and security of this country and we will be vigilant in protecting their rights at home," said Assistant Attorney General for the Civil Rights Division Thomas E. Perez. "We commend Capital One for taking steps to develop strong SCRA policies before they knew the full results of our investigation."

Capital One cooperated fully with the Justice Department’s investigation into its SCRA practices and has also agreed to pay above and beyond the $12 million if ongoing, independent audits required by the settlement turn up violations in accounts that it recently acquired from HSBC or ING Direct USA. Capital One has also, on its own initiative, recently adopted several policies that go beyond the requirements of the SCRA, such as extending a 4 percent interest rate to qualifying service members and giving an additional one-year grace period before de-enrolling service members from the reduced interest rate program.

Service members will be identified and compensated, with no action required on their part, on accounts dating back to July 15, 2006. As a result of the decree, Capital One has agreed to treat a service member’s request for a 6 percent rate relief in one area of its lending, such as credit cards, as a request for a 6 percent rate relief for any loan the servicemember may have with Capital One or its affiliates. This is the first time the Justice Department has obtained this type of enterprise-wide rate reduction relief from a lender under the SCRA. The settlement also requires Capital One to adopt policies and practices to prevent violations of the SCRA in the future.

The settlement was filed in conjunction with the Department’s complaint, which alleges that Capital One violated the SCRA, from at least July 15, 2006 to Nov. 21, 2011, when it: 1) wrongly denied certain written requests made by SCRA-protected service members to have the interest rate on their credit cards and motor vehicle finance loans lowered to 6 percent per year; 2) provided insufficient interest rate benefits on certain accounts that were enrolled after written requests were received from SCRA-protected service members; 3) foreclosed on the mortgages of certain SCRA-protected service members without court orders; 4) repossessed certain SCRA-protected service members’ motor vehicles without court orders; and 5) obtained default judgments on certain debts owed on credit cards, mortgage foreclosures, and/or motor vehicles without filing accurate affidavits of military service .

"We rely on the SCRA to guard and protect the rights of our men and women of the armed forces so that they can focus on their service to our country," said U.S. Attorney for the Eastern District of Virginia Neil MacBride. "This case underscores the need for financial service providers to be aware of the wide-ranging protections and benefits the SCRA provides and to have in place policies and procedures that ensure service members’ SCRA rights are protected."

The agreement, which is subject to court approval, was filed today in federal court in Alexandria, Va. The lawsuit resulted from a referral to the Justice Department by the Office of the Staff Judge Advocate at Davis-Monthan Air Force Base in Arizona. The referral involved a claim of a single service member’s failure to receive an interest rate reduction on his Capital One credit card account. The settlement comes after a two-year investigation of Capital One by the Department of Justice.

The SCRA provides critical consumer and other protections to the men and women serving our nation in the military. Its enactment was recognition that those who are making great sacrifices to protect us deserve our full support at home.

DOJ, HUD AND OTHERS ANNOUNCED $25 BILLION SETTLEMENT WITH FIVE LARGEST U.S. MORTGAGE SERVICERS

The following excerpt is from the U.S. Department of Justice website:
Monday, March 12, 2012
$25 Billion Mortgage Servicing Agreement Filed in Federal Court
WASHINGTON – The Justice Department, the Department of Housing and Urban Development (HUD) and 49 state attorneys general announced today the filing of their landmark $25 billion agreement with the nation’s five largest mortgage servicers to address mortgage loan servicing and foreclosure abuses.
The federal government and state attorneys general filed in U.S. District Court in the District of Columbia proposed consent judgments with Bank of America Corporation, J.P. Morgan Chase & Co., Wells Fargo & Company, Citigroup Inc. and Ally Financial Inc., to resolve violations of state and federal law.    

The unprecedented joint agreement is the largest federal-state civil settlement ever obtained and is the result of extensive investigations by federal agencies, including the Department of Justice, HUD and the HUD Office of the Inspector General (HUD-OIG), and state attorneys general and state banking regulators across the country.

The consent judgments provide the details of the servicers’ financial obligations under the agreement, which include payments to foreclosed borrowers and more than $20 billion in consumer relief; new standards the servicers will be required to implement regarding mortgage loan servicing and foreclosure practices; and the oversight and enforcement authorities of the independent settlement monitor, Joseph A. Smith Jr.
The consent judgments require the servicers to collectively dedicate $20 billion toward various forms of financial relief to homeowners, including: reducing the principal on loans for borrowers who are delinquent or at imminent risk of default and owe more on their mortgages than their homes are worth; refinancing loans for borrowers who are current on their mortgages but who owe more on their mortgage than their homes are worth; forbearance of principal for unemployed borrowers; anti-blight provisions; short sales; transitional assistance; and benefits for service members.

The consent judgments’ consumer relief requirements include varying amounts of partial credit the servicers will receive for every dollar spent on the required relief activities.  Because servicers will receive only partial credit for many of the relief activities, the agreement will result in benefits to borrowers in excess of $20 billion.  The servicers are required to complete 75 percent of their consumer relief obligations within two years and 100 percent within three years.

In addition to the $20 billion in financial relief for borrowers, the consent judgments require the servicers to pay $5 billion in cash to the federal and state governments.  Approximately $1.5 billion of this payment will be used to establish a Borrower Payment Fund to provide cash payments to borrowers whose homes were sold or taken in foreclosure between Jan. 1, 2008, and Dec. 31, 2011, and who meet other criteria.
The court documents filed today also provide detailed new servicing standards that the mortgage servicers will be required to implement.  These standards will prevent foreclosure abuses of the past, such as robo-signing, improper documentation and lost paperwork, and create new consumer protections.  The new standards provide for strict oversight of foreclosure processing, including third-party vendors, and new requirements to undertake pre-filing reviews of certain documents filed in bankruptcy court.  The new servicing standards make foreclosure a last resort by requiring servicers to evaluate homeowners for other loss mitigation options first.  Servicers will be restricted from foreclosing while the homeowner is being considered for a loan modification.  The new standards also include procedures and timelines for reviewing loan modification applications and give homeowners the right to appeal denials.  Servicers will also be required to create a single point of contact for borrowers seeking information about their loans and maintain adequate staff to handle calls.

The consent judgments provide enhanced protections for service members that go beyond those required by the Servicemembers Civil Relief Act (SCRA).  In addition, the servicers have agreed to conduct a full review, overseen by the Justice Department’s Civil Rights Division, to determine whether any service members were foreclosed or improperly charged interest in excess of 6 percent on their mortgage in violation of SCRA.

The oversight and enforcement authorities of the settlement’s independent monitor are detailed in the court documents filed today.  The monitor will oversee implementation of the servicing standards and consumer relief activities required by the agreement and publish regular public reports that identify any quarter in which a servicer fell short of the standards imposed in the settlement.  The consent judgments require servicers to remediate any harm to borrowers that are identified in quarterly reviews overseen by the monitor and, in some instances, conduct full look-backs to identify any additional borrowers who may have been harmed.  If a servicer violates the requirements of the consent judgment it will be subject to penalties of up to $1 million per violation or up to $5 million for certain repeat violations.

The consent judgments filed today resolve certain violations of civil law based on mortgage loan servicing activities.  The agreement does not prevent state and federal authorities from pursuing criminal enforcement actions related to this or other conduct by the servicers.  The agreement does not prevent the government from punishing wrongful securitization conduct that will be the focus of the new Residential Mortgage-Backed Securities Working Group.  In the servicing agreement, the United States also retains its full authority to recover losses and penalties caused to the federal government when a bank failed to satisfy underwriting standards on a government-insured or government-guaranteed loan; the United States also resolved certain Federal Housing Administration (FHA) origination claims with Bank of America as part of this filing and with Citibank in a separate matter.  The agreement does not prevent any action by individual borrowers who wish to bring their own lawsuits.  State attorneys general also preserved, among other things, all claims against the Mortgage Electronic Registration Systems (MERS), and all claims brought by borrowers.

Investigations were conducted by the U.S. Trustee Program of the Department of Justice, HUD-OIG, HUD’s FHA, state attorneys general offices and state banking regulators from throughout the country, the U.S. Attorney’s Office for the Eastern District of New York, the U.S. Attorney’s Office for the District of Colorado, the Justice Department’s Civil Division, the U.S. Attorney’s Office for the Western District of North Carolina, the U.S. Attorney’s Office for the District of South Carolina, the U.S. Attorney’s Office for the Southern District of New York, the Special Inspector General for the Troubled Asset Relief Program and the Federal Housing Finance Agency-Office of the Inspector General.  The Department of the Treasury, the Federal Trade Commission, the Consumer Financial Protection Bureau, the Justice Department’s Civil Rights Division, the Board of Governors of the Federal Reserve System, the Federal Deposit Insurance Corporation, the Office of the Comptroller of the Currency, the Department of Veterans Affairs and the U.S. Department of Agriculture made critical contributions.

The joint federal-state agreement is part of enforcement efforts by President Barack Obama’s Financial Fraud Enforcement Task Force.  President Obama established the interagency Financial Fraud Enforcement Task Force to wage an aggressive, coordinated and proactive effort to investigate and prosecute financial crimes.  The task force includes representatives from a broad range of federal agencies, regulatory authorities, inspectors general and state and local law enforcement who, working together, bring to bear a powerful array of criminal and civil enforcement resources.  The task force is working to improve efforts across the federal executive branch, and with state and local partners, to investigate and prosecute significant financial crimes, ensure just and effective punishment for those who perpetrate financial crimes, combat discrimination in the lending and financial markets, and recover proceeds for victims of financial crimes.