The Office of the Comptroller of the Currency (“OCC”) announced enforcement actions against Capital One, N.A., and Capital One Bank (USA), N.A. (“Capital One”), for violations and compliance deficiencies related to the Service Members Civil Relief Act (SCRA).
The SCRA provides service members relief from certain obligations and temporarily suspends judicial and administrative proceedings and transactions involving civil liabilities when military service affects the service member’s ability to meet or attend to civil matters. Among the protections provided by the act are limitations on foreclosures and interest rates, requirements to forgive interest in excess of 6 percent on pre-service debts, and allowances to terminate automobile leases under certain circumstances.
The enforcement actions require Capital One to take prompt actions to correct deficiencies in their SCRA compliance programs. First, the enforcement actions require the banks to improve their policies and procedures for determining whether service members who request certain benefits provided by the SCRA are eligible for such benefits, ensuring that the SCRA benefits are calculated correctly, and verifying the military status of service members prior to seeking or obtaining a default judgment. Second, the enforcement actions require the banks to ensure the retention of accurate and complete records that document the basis for decisions regarding service members’ eligibility for SCRA benefits or protections, and to develop and implement a comprehensive SCRA training program for employees. Third, the enforcement actions require the banks to establish robust oversight of and controls over their third-party vendors that provide marketing, sales, delivery, servicing, and fulfillment of services for the banks’ financial products, such as credit card accounts, mortgage loans, motor vehicle finance loans, and consumer loans and lines of credit.
The OCC’s actions also require Capital One to engage an independent firm to identify all service members who were eligible for SCRA benefits or protections and who were financially harmed by the banks’ violations of the SCRA. To identify these service members, the firm will conduct a comprehensive review for the period from July 15, 2006 to July 25, 2012 of:
i. foreclosure and repossession actions against service members eligible for SCRA protection;
ii. default judgments obtained against service members eligible for SCRA protection; and
iii. loans and credit card accounts for which service members requested SCRA benefits.
The independent firm will also conduct a similar review of credit card accounts funded by Capital One pursuant to a partnership agreement with Kohl’s Department Stores, Inc. Capital One must submit a plan to remediate all financial injury and make restitution to each service member who was harmed by Capital One’s violations of the SCRA.