Compliance Blog

Posted by Anthony Demangone

Tomorrow is Veterans Day.  NAFCU's offices will be closed tomorrow, and there will be no blog update.  In honor of the holiday, I wanted to share some resources that help explain the laws and regulations that apply to financial institutions when we serve men and women who are in the armed forces. 

As you know, the protections for those who serve in the military are largely grouped into two areas:

1. The Servicemembers Civil Relief Act, and
2. The recently enacted Department of Defense regulations that implemented provisions of the John Warner National Defense Authorization Act for Fiscal Year 2007.  I'll refer to these as the DoD regulations.

Here are some resources that will help you navigate these requirements.

• The FFIEC issued detailed examiner procedures regarding the DoD regulations.
• NCUA issued Letter to Credit Union 09-CU-12, which contains not only the DoD procedures from the first link, but also procedures regarding the SCRA.
• Here's a 146-page overview of the SCRA. (Courtesy of the American Bar Association.)  This loads very, very slowly.
• Here's an SCRA guide published by a retired Army Reserve JAG colonel.  (Courtesy of the American Bar Association.) It is very detailed, and very handy.

• And here's a free SCRA brochure developed by NAFCU. (Member log-in needed.)

Finally, here are a few thoughts.  I tend to be a conservative fellow when it comes to compliance.  While the SCRA gives creditors the right to challenge those who assert rights under the law, I would tread very carefully in this area.  In addition, I wouldn't get too caught up in tracking exactly when rights spring to life, and whether the servicemember has all the proper paperwork to you before you take action, for example, to lower rates on covered loans. Here's why.

• Remember the purpose.The purpose behind the SCRA is to protect those who are in harm's way, protecting us.  Sure, the servicemember has to meet certain procedural hurdles, but I'd always keep this in mind: Those in need remember those who help them. 
• How much are you talking about, anyway?  So you have to lower an interest rate from 11.9 percent to 6 percent. How much money is that costing your credit union on an annual basis?  Or on used car loan that currently has a 7.9 rate? 
• Remember your reputation.  Keeping in mind the last bullet point, is it worth it to be a real stickler on the SCRA?  Or does it make sense to be lenient?  You can always create a policy that is more beneficial than the SCRA requires.  One of my mentors had a good saying when people asked her whether the SCRA really protected a particular servicemember.  She would reply with this question: Would you want your SCRA decision regarding a particular member of the armed forces on the front page of your local newspaper? 

To all of you, enjoy the holiday.  And to by brother-in-law Rob, and my cousins Mark, Thomas, Patrick, Kyle, Devin, Matt and Corrie, many, many thanks for your service.