On May 13, the U.S. Department of Justice (DOJ) and Department of Education (ED) announced a $60 million settlement against a major student loan servicer for allegedly failing to follow proper procedures for submitting affidavits in support of default judgments and for allegedly failing to reduce the interest rates on loans to servicemembers to 6 percent, when the Servicemembers Civil Relief Act (SCRA) required it. 

Ignoring the SCRA's text, and deviating from prior interpretations by the CFPB and ED, the settlement reflects a reading of the SCRA under which a servicer and creditor must reduce the interest rate to 6 percent upon the existence of any institutional knowledge of military service, even if the servicemember has never submitted a request for such relief.

In the case of default judgments, the settlement reflects the efforts of the DOJ and CFPB to "improve" on statutory requirements, which have no express counterparts in the SCRA, establishing procedures for collection referrals, expediting procedures for filing affidavits, imposing specific timing requirements, and requirements for government preapproval of any waiver forms for waiver requests made in advance of any anticipated default judgments.

Under the circumstances, the settlement creates significant new risk under the SCRA, not only for student loan servicers but for all consumer finance companies, collection agencies, and collection firms. In light of the CFPB and DOJ focus on the SCRA as an enforcement priority, and the escalated penalties for SCRA violations, the stakes for compliance are high.

In this webinar, we will discuss the implications of the settlement and the measures your business should take in order to ensure compliance.

topics

  • Background on SCRA statutory requirements and penalties 
  • Overview of the new default judgment and rate reduction rules 
  • Implications for the motor vehicle finance industry
  • Implications for the mortgage banking industry 
  • Implications for the student loan industry 
  • Implications for servicemember litigation in general 
  • Legislative proposals in the wake of the DOJ settlement 
  • Compliance best practices and procedures  

program

12:00 PM - 1:00 PM ET | Webinar

moderator

Alan S. Kaplinsky, Practice Leader, Consumer Financial Services Group

presenters

John L. Culhane, Jr.
Consumer Financial Services Group

Anthony C. Kaye
Consumer Financial Services Group

Christopher J. Willis
Consumer Financial Services Group

Reid F. Herlihy
Mortgage Banking Group

This program is open to Ballard Spahr clients and members of the financial services industry. There is no cost to attend. This program is not eligible for continuing education credits.

Please register at least two days before the webinar. Login details will be sent to all registrants. For more information, contact Lisa M. Prickril at prickrill@ballardspahr.com.

Related Practices

Consumer Financial Services
Mortgage Banking