Navigating SCRA Lending Requirements: 6 Tips for Compliance

Show your commitment to Servicemembers by building comprehensive, carefully designed compliance programs for the Servicemembers Civil Relief Act (SCRA). Here, we share best practices we’ve implemented to help clients meet SCRA lending requirements while serving this important community.

The CFPB report from the Office of Servicemember Affairs, released in September 2024, identified complaint trends, highlighted financial services issues, and offered improvements to financial protections for the military community. The report showed that Servicemembers, Veterans, or their families filed 84,600 complaints in 2023, representing a 27% increase from 2022 and a 98% increase compared to 2021. The most common complaints were about credit or consumer reporting, debt collection, checking or savings accounts, and credit cards.

The SCRA stands out from most regulations due to its broad applicability, making general compliance challenging. So, compliance programs for the SCRA must be robust and meticulously designed to ensure strict adherence.

Strengthen SCRA Compliance Through Three Lines of Defense

A strong compliance program brings together controls from three distinct lines of defense:

1. Business Lines: Embedding controls within the business lines that handle SCRA-related functions.
2. Internal Compliance Group: Conducting independent compliance checks.
3. Internal Audit Group: Performing thorough audits.

These controls focus on two critical aspects of the SCRA:

• Conducting searches of the Defense Manpower Data Center (DMDC) at key protection points.
• The notification, activation, monitoring, and removal of SCRA benefits.

Whenever possible, controls should be automated and report-driven, with minimal lag time between action and error identification. Embedded business line control functions should review SCRA processes related to the calculation and removal of relief before finalization.

Additionally, critical SCRA-related documents, such as military affidavits or waivers of rights, should be reviewed and validated in real-time before submission, acceptance, or filing. We recommend managing SCRA holistically. A holistic review is important because it enables active-duty Servicemembers to focus on their job and relieves them – and their families – from the concern of financial burdens.

Best Practices Created from Regulatory Actions

In recent years, heightened awareness surrounding the SCRA has led regulators to expect certain practices, even though they are not explicitly required by the regulation. This increased scrutiny aims to ensure that Servicemembers receive the full benefits intended by the SCRA.

CFPB Recommendations Aim to Strengthen Financial Protections for Servicemembers and Veterans

Recent CFPB recommendations to improve financial protections for Servicemembers, both active duty and Veterans include the following items:

• Streamline and Automate Payment Options and Forgiveness Programs: Federal student loan servicers should consider how to automatically apply payment options and forgiveness programs for eligible Servicemembers and Veterans to ensure access to protections and benefits without extensive paperwork. (Office of Servicemember Affairs Annual Report, Sept. 2024, p 31)
• Ensure Reliable Online Tools: Make sure online tools such as chat, email portals, access to online information, and callback services are reliably accessible to meet Servicemembers’ customer service needs, especially for those stationed abroad or deployed. (Office of Servicemember Affairs Annual Report, Sept. 2024, p 31)
• Prevent Harm from Transcript Withholding: Educational institutions and policymakers should ensure that transcript withholding does not harm military families. Servicemembers must have access to transcripts regardless of education funding source or debt status with the institution. (Office of Servicemember Affairs Annual Report, Sept. 2024, p 31)
• Provide Ready Access to Reporting Tools and Resources: Veterans should have ready access to tools and resources to report through a single point of contact any financial complaints, including fraud and scams. (Office of Servicemember Affairs Annual Report, Sept. 2024, p 32)

6 Best Practices for Compliance and Servicemember Support

Bridgeforce compiled best practices to help organizations serve this population and remain compliant. We consider relief and protections under SCRA as “benefits” and recommend that organizations maintain consistency on how they apply benefits across the universe of customers classified as Servicemembers, Veterans and families.

1. Consistency of Applying the Benefits

• Organizations should provide SCRA relief for all products, especially regarding the level and duration of Section 527, interest rate reduction.
• Inconsistent application across products, without documented exceptions, leaves the door open for UDAAP claims or claims of disparate treatment.
• Offering different rates and terms for various products from your institution creates a poor and confusing customer experience.

2. Single Request for Benefits Relief

• Treat any request for relief as a request for all the Servicemembers’ accounts at your institution.
• Implement a process to notify other areas, at a minimum.
• Ensure Servicemembers do not need to notify multiple lines of business to request relief for each of your products.

3. Centralized SCRA Handling

• Centralize SCRA handling to drastically improve the Servicemember customer experience.
• Encourage highly trained agents to handle accounts instead of routing calls through general customer service centers.
• Enhance technology to support online chat and appointment scheduling to provide flexibility for Servicemembers with limited phone access and time zone differences.

4. Strict Vendor Oversight

• Treat all vendor actions related to SCRA as if you were completing those actions; consider vendors an extension of your institution.
• Conduct validation for actions completed by outside counsel related to DMDC searches or creation of affidavits.
• Regulators find it unacceptable to operate under the premise that attorneys “are hired to represent us, therefore we trust their actions.”

5. Collection Agencies

• Withhold SCRA debt from collection agency referrals to ensure that collection activities align with SCRA lending requirements.
• Submit the agency referral file through the DMDC to identify SCRA accounts.
• Recall accounts with active-duty status identified after agency referral, with your institution resuming internal collections.

6. Complaint Monitoring

• Monitoring credit bureau reporting of active SCRA populations to ensure accuracy happens more frequently across the industry.
• Note: Credit reporting under the normal course of business (e.g., account status, delinquency counters, etc.) is not prohibited.

Use an SCRA Action Plan to Enhance Servicemember Experience and Meet SCRA Lending Requirements

As the regulatory environment around the SCRA evolves, compliance strategies must keep pace. SCRA-related news surfaces regularly, with new consent orders, proposed legislation, and enacted laws highlighting the need for proactive oversight. Organizations cannot afford complacency in managing SCRA processes. Be open to revising existing practices and agile in adopting emerging industry best practices, which regulators will increasingly expect.

An action plan is essential for documenting any changes or enhancements to SCRA practices. Maintaining evidence-based records—such as policies, procedures, processes, and test results—is crucial to stay compliant in a shifting regulatory landscape. When developing, modifying, or maintaining SCRA-related processes, keep in mind the unique needs of Servicemembers, who dedicate their lives to ensuring our nation’s freedom.

Built to Last with Bridgeforce: A Commitment to Servicemember Financial Protections

An effective compliance program is more than meeting SCRA lending requirements—it’s a commitment to supporting Servicemembers with the financial benefits they deserve. By proactively maintaining detailed documentation, training personnel, and fostering centralized, reliable processes, organizations can better anticipate regulatory expectations and provide seamless support to military customers.

Staying responsive to evolving SCRA regulations, improving access to relief, and ensuring consistency across all service lines are essential steps to uphold both compliance and trust. As regulatory focus on servicemember protections grows, so should dedication to crafting a robust SCRA action plan that keeps Servicemembers’ unique challenges and contributions at the forefront.

Bridgeforce brings hands-on SCRA expertise, from managing lookbacks and assessing customer journeys to designing best-practice workshops and crafting compliance policies and desktop procedures. We’ve built SCRA centers of excellence—let us help you design yours. Contact us to start the journey toward a white glove approach for Servicemembers.