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.
The action, said Attorney General Eric Holder, “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.”
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.
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 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.
In a separate action, the Office of the Comptroller of the Currency (OCC) is taking enforcement actions against Capital One for violations and compliance deficiencies related to the SCRA.
The enforcement actions require the banks 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 servicemembers 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 servicemembers 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 servicemembers' 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.