Would your credit union make these mistakes?

by. Henry Meier

The biggest news of the week should be the fact that the Senate Banking Committee passed legislation that would eliminate Fannie and Freddie, but in reality this bill has about as much chance of passing in the near future as Chris Christie does of being the Transportation Secretary. As succinctly summarized by Law360: “Senate Housing bill moves from Committee to Limbo.”

I might as well talk about something that could actually impact your credit union right now; specifically, a recent settlement involving the Servicemembers Civil Relief Act. The idea behind this law is straightforward. We don’t want someone willing to put themselves in harm’s way for the sake of our country to be concerned about making the next car or mortgage payment. Consequently, the statute, among other things, caps at 6% the interest that can be charged on loans that a person takes out prior to being called to active duty, but only for the period of active duty.

Earlier this week, Sallie Mae and its servicer (I’m just going to refer to Sallie Mae) reached a settlement with the FDIC over allegations that it violated Section 5 of the Servicemembers Civil Relief Act. In announcing the settlement, the FDIC stated that Sallie Mae had violated the SCRA by:

  1. Unfairly conditioning receipt of benefits under the SCRA upon requirements not found in the Act;
  2. Improperly advising service members that they must be deployed to receive benefits under the SCRA; and
  3. Failing to provide complete SCRA relief to service members after having been put on notice of these borrowers’ active duty status.
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