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.

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.

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.

PROTECTING THE TROOPS ON THE HOME FRONT

FROM:  AMERICAN FORCES PRESS SERVICE

Officials Outline Progress in Protecting Troops Financially

By Karen Parrish

WASHINGTON, June 27, 2012 - Defense Department leaders recognize that service members burdened with financial problems can't reach full mission effectiveness, and they've made strides to help, a senior Pentagon official told a Senate committee yesterday.

Army Col. Paul Kantwill, director of the department's personnel and readiness legal policy office, spoke before the Senate's Banking, Housing and Urban Affairs committee. Kantwill was part of a panel of witnesses that also included Holly Petraeus, assistant director of the Consumer Financial Protection Bureau, and Joseph R. "Beau" Biden III, Delaware's attorney general.

Kantwill, who worked for 22-plus years as an Army judge advocate, told senators that while congressional action has curbed troops' exposure to predatory lending practices, military financial counselors and legal assistance offices still occasionally see clients who have fallen victim to them.

Congress passed the Military Lending Act in 2006, authorizing DOD to regulate service members' use of certain "credit" offers that were actually high-interest loans. The department then restricted payday loans, vehicle title loans and tax-refund anticipation loans, Kantwill noted in his preparedremarks.

During his live testimony, Kantwill noted the department received a report in May from the Consumer Federation of America.

"The report concludes that the Military Lending Act has had the desired effect of curtailing the use of payday, vehicle title and refund anticipation loans by service members and their families," he said. "The overriding theme of the report, however, is that we have achieved much but we have much work to do."

The report and assessments from the field both indicate that lenders still target the military population with payday loans and auto title loans charging excessive interest, Kantwill said. There is also more online lending, often from "offshore" creditors not subject to the act, he noted.

"Yet another concern in the field is that automobile dealers, especially used car dealers and 'buy here, pay here' establishments, are using unusually high-interest loans," he added.

Mortgage foreclosures also remain a concern for service members and families, he said.

To help troops avoid or escape such financial hazards, the department has implemented an aggressive financial education program, and is committed to providing first-class legal assistance and working with other agencies and the financial industry," Kantwill said.

DOD's financial readiness campaign uses education, resources, programs, and protections designed to "alleviate financial stressors on the military to enhance family, financial and overall mission readiness," he said.

The primary financial readiness effort for legal assistance programs takes place where it's needed most, he said: to individual clients at the installation level.

"These include tip-of-the-spear services in all consumer law areas, to include [Servicemembers Civil Relief Act] issues, suspect lending and aggressive debt practices," Kantwill said.

The department and the military services are working with the Consumer Financial Protection Bureau and its Office of Servicemember Affairs, as well as with the Department of Justice and the Federal Trade Commission, to ensure service members' needs are met, he added.

DOD also stays engaged with the financial industry, and is designing a survey to gather current financial information from communities where service members are assigned, Kantwill said.

"The department is committed to our service members and our families, and we remain steadfast in supporting them in every way, especially as it concerns their financial futures," he said.

Petraeus noted during her testimony that service members who receive permanent change of station orders and must sell their homes now qualify by law for some "short-sale" opportunities, which can forgive mortgage amounts that exceed the sale price in markets where property values have fallen.

A recent settlement between the federal government, 49 states and the five largest mortgage servicers provides some short-sale opportunities for service members with orders to move, she noted.

"And last week, the Federal Housing Finance Authority ... announced that PCS orders are a qualifying hardship for a short sale," Petraeus added.

That means a service member on PCS orders, with a Fannie Mae or Freddie Mac loan for a property purchased on or before June 30, 2012, "will not be asked to make a financial contribution to receive the short sale or be liable for the difference between the short sale amount and the original mortgage amount," she said.

Petraeus added that her office also is working to help educate military members on student loan options, and is preparing a financial-training module that entering service members can access by smartphone or computer before they begin military training.

"A recruit in [the delayed-entry program] has more time and less stress than in basic training, and we think we'll better retain some 'just-enough and just-in-time' financial lessons," Petraeus noted.

JUSTICE DEPARTMENT FINDS RELIEF FOR SERVICEMEMBERS WHO HAD CARS TOWED AND SOLD

FROM:  U.S. DEPARTMENT OF JUSTICE
Tuesday, May 1, 2012
Justice Department Settles Towing Company Case Under the Servicemembers Civil Relief Act
The Justice Department announced that it had reached a settlement of alleged violations of the Servicemembers Civil Relief Act (SCRA) providing damages and credit repair to 26 servicemembers whose cars were towed and sold while they were on active duty without obtaining court orders as SCRA requires.   The settlement resolves allegations that B.C. Enterprises Inc., d/b/a Aristocrat Towing and Aristocrat Towing Inc. (collectively “Aristocrat Towing”), violated the SCRA when it towed and sold these servicemembers’ vehicles without obtaining court orders.   The case began with a referral from the U.S. Navy to the Justice Department after Navy Lieutenant Yahya Jaboori returned from deployment in Iraq to find that Aristocrat Towing had towed and sold his vehicle without a court order while he was deployed.

The SCRA protects the rights of servicemembers while on active duty in the military by suspending or modifying certain civil obligations.  Under the terms of the settlement, which must be approved by a federal court in Virginia, Aristocrat Towing must pay a total of $75,000 in damages and repair the credit of the identified aggrieved servicemembers.

“Servicemembers make great personal sacrifices.   We will ensure that the rights of the brave men and women who serve and protect us are protected at home,” said Assistant Attorney General for the Civil Rights Division Thomas E. Perez.   “This settlement sends a strong message to businesses nationwide that the Justice Department will enforce the SCRA to protect against the taking of servicemembers’ property without first seeking court orders as is required by law.”

“No member of the military should come home from deployment to find their car has been towed and sold,” said U.S. Attorney for the Eastern District of Virginia Neil MacBride. “Businesses should be aware of the many rights that SCRA gives to servicemembers and their families, and businesses should also be certain that we’ll work tirelessly to ensure that those rights are protected.”

This lawsuit, filed in 2008, was the first filed by the Civil Rights Division under the SCRA.   The Civil Rights Division received enforcement authority under the SCRA in 2006, and has since filed suit and entered into a number of settlements with defendants ranging from local landlords to the nation’s five largest mortgage servicers.

Servicemembers and their dependents who believe that their SCRA rights have been violated should contact the nearest Armed Forces Legal Assistance Program office.