Lending giant JP Morgan Chase is refunding 4,000 military members about $2 million after violating provisions of the Servicemembers Civil Relief Act, a landmark piece of legislation that provides foreclosure safeguards for those who serve.
Chase officials have acknowledged the mistakes and say they are in the process of rectifying the problems. The company also improperly foreclosed on 14 service members.
“We now have a dedicated team in place devoted to servicing home loans for military personnel — the members of our military deserve nothing less,” Kristin Lemkau, chief communications officer at JP Morgan Chase, said in a statement to NBC News, which first broke the story. “We feel like we try to do a lot for military families and veterans, so it’s particularly painful to have made mistakes with them in our core business.”
The Chase fiasco has proved painful for both company officials and their military consumers. It’s also focused renewed attention on the Servicemembers Civil Relief Act and the importance of protecting American service members from predatory lending and financial exploitation.
Safeguarding Service Members
President George W. Bush signed the SCRA into law in December 2003, nine months after the second Iraq War started. The act essentially expanded and updated the original Soldiers’ and Sailors’ Civil Relief Act passed in 1940.
The SCRA spells out a host of protections for active duty U.S. service members, covering financial and civil obligations ranging from credit card debt and mortgage payments to taxation and trials.
The provisions regarding mortgages and foreclosure have become increasingly important over the last few years. The SCRA provides service members with a grace period that bars foreclosure actions and caps interest rates at 6 percent.
These provisions are extended to service members with conventional or government-backed loans, such as FHA or VA loans. Reservists and National Guardsmen can also be eligible for protection under the SCRA.
New Consumer Protection Agency
The recent problems at Chase have also underscored the need for continued oversight, education and advocacy when it comes to military members and predatory lending.
Holly Petraeus, wife of Gen. David Petraeus, will serve as head of the OSA. The agency’s goal is to better educate military members about consumer protection and more closely monitor complaints and problems.
“There are serious financial problems, and they lead to a lot of repercussions: loss of security clearance and just the ability to do the best job they can do because they’re preoccupied with financial matters,” said Ms. Petraeus. “This bureau is an enforcement agency; they actually have the power to make changes. That was very exciting to me, and a big part of why I was very happy to come over and assume this job.”
Meanwhile, a couple of Democratic U.S. senators — John Kerry of Massachusetts and Jack Reed of Rhode Island — are pushing for an investigation in the wake of the Chase violations.
The call was echoed by other groups, including VoteVets.org, a veteran advocacy and awareness group.
“Troops are risking their lives for America, and the law protects them from this kind of nonsense while they are in harm’s way,” said Ashwin Madia, interim chairman of VoteVets.org. “We simply don’t know if JP Morgan Chase is the only bank to violate the law. How many other banks could be getting away with the same thing?”
About the author: Chris Birk writes about real estate and the mortgage industry for a host of sites and publications, from Lenderama and Bigger Pockets to the Huffington Post and Motley Fool. A former newspaper and magazine writer, he is also content director for a leading VA lender. Follow him on Google+.