July 26, 2012
OCC Takes Actions Against Capital One to Assure Servicemembers Receive Credit Protections for Their Mortgages and Other Loans
WASHINGTON — The Office of the Comptroller of the Currency (OCC) today announced enforcement actions against Capital One, N.A., and Capital One Bank (USA), N.A., for violations and compliance deficiencies related to the Servicemembers Civil Relief Act (SCRA).
The SCRA provides servicemembers relief from certain obligations and temporarily suspends judicial and administrative proceedings and transactions involving civil liabilities when military service affects the servicemember's ability to meet or attend to civil matters. Among the protections provided by the act are limitations on foreclosures and interest rates, requirements to forgive interest in excess of 6 percent on pre-service debts, and allowances to terminate automobile leases under certain circumstances.
"Members of our nation's armed forces and their families sacrifice much to safeguard the liberties we enjoy," said Comptroller of the Currency Thomas J. Curry. "Because of the extraordinary hardships of military service, the law provides certain protections to our servicemembers. Today's actions by the OCC and the Department of Justice help assure that servicemembers receive every benefit entitled under the law in the future and serve to correct past violations of SCRA by the bank."
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.
The OCC's actions also require the banks to engage an independent firm to identify all servicemembers who were eligible for SCRA benefits or protections and who were financially harmed by the banks' violations of the SCRA. To identify these servicemembers, the firm will conduct a comprehensive review for the period from July 15, 2006 to July 25, 2012 of:
- foreclosure and repossession actions against servicemembers eligible for SCRA protection;
- default judgments obtained against servicemembers eligible for SCRA protection; and
- loans and credit card accounts for which servicemembers requested SCRA benefits.
The independent firm will also conduct a similar review of credit card accounts funded by Capital One pursuant to a partnership agreement with Kohl's Department Stores, Inc. Capital One must submit a plan to remediate all financial injury and make restitution to each servicemember who was harmed by Capital One's violations of the SCRA.
Today's action by the OCC is separate from, but coordinated with, actions by the Department of Justice which are also being announced today.