DOJ and CFPB Want You to Proactively Screen for SCRA-Protected Servicemembers. Here's What That Means.

On December 5, 2024, the Department of Justice and the Consumer Financial Protection Bureau published a joint letter to financial services providers that should be required reading for every compliance officer in the country.

The letter’s core message: institutions should proactively identify servicemembers in their portfolios and automatically apply SCRA interest rate protections. The days of waiting for servicemembers to request their own protections are numbered.

The letter itself is a recommendation. But with 51 enforcement actions and $484 million in recoveries across two administrations, the DOJ and CFPB have demonstrated what happens when institutions take a passive approach.

What the Letter Actually Says

The DOJ/CFPB letter covers three specific recommendations for creditors handling SCRA interest rate obligations.

1. Proactively identify eligible accounts using the DMDC.

The letter recommends that institutions “proactively check[] accounts using the [DMDC] and automatically appl[y] the SCRA interest rate cap to all eligible servicemembers.” This is the most significant recommendation in the document. Rather than relying on servicemembers to notify creditors of their active-duty status, the regulators want institutions to identify protected accounts on their own.

The Defense Manpower Data Center (DMDC) is the Department of Defense’s authoritative database for military status verification. Any creditor can submit queries to determine whether an individual is on active duty.

2. Extend protections across all accounts when one is identified.

If a servicemember requests an interest rate reduction on one account, the letter recommends that the institution extend the 6% cap to all eligible obligations held by that servicemember. Under the SCRA, protections apply to any pre-service financial obligation. The letter makes clear that regulators expect institutions to apply protections broadly, not narrowly.

This recommendation has particular significance in light of S.1550, the “Improving SCRA Benefit Utilization Act of 2025,” which would codify this approach into law. The bill advanced through a Senate Armed Services subcommittee by voice vote on February 24, 2026, and would amend 50 U.S.C. Section 3937 to require that a single servicemember notification triggers the rate cap on all of that servicemember’s obligations with the creditor.

3. Streamline processes to reduce the burden on servicemembers.

The letter calls on institutions to make it easier for servicemembers to request and receive protections. This includes simplifying documentation requirements and reducing processing times. The regulators are clear: the administrative burden should fall on the institution, not the servicemember.

The Scale of the Problem: Over 90% Are Being Missed

The joint letter references CFPB research showing that fewer than 10% of eligible auto loans and approximately 6% of eligible personal loans held by activated National Guard and Reserve members receive the SCRA interest rate cap.

That means over 90% of servicemembers who are legally entitled to a reduced interest rate are not receiving it.

The source is a December 2022 CFPB report, “Protecting Those Who Protect Us: Evidence of Activated Guard and Reserve Servicemembers’ Usage of Credit Protections Under the Servicemembers Civil Relief Act.” The report analyzed lending data from 2007 through 2018 and found a consistent pattern: the vast majority of eligible servicemembers do not benefit from rate reductions they are legally owed.

The CFPB estimates this gap costs servicemembers nearly $10 million annually in excess interest charges.

Why This Matters Beyond Interest Rates

The joint letter focuses on interest rate protections under Section 3937 of the SCRA. But the proactive identification principle applies to every SCRA protection.

For property managers, the same logic holds: if you manage properties near military installations, you almost certainly have active-duty tenants. The question is whether you are identifying them before your team takes an adverse action, or only after a complaint is filed.

The enforcement record is clear on this point. Greystar Real Estate paid $1.4 million in 2025 for charging early termination fees to servicemembers who terminated leases under Section 3955. FPI Management paid $73,587 in 2023 for requiring servicemembers to repay lease signing incentives. PRG Real Estate paid $1.59 million in 2019 for SCRA violations affecting 127 servicemembers.

In every case, the violations occurred because the company took an adverse action without first checking whether the individual was a protected servicemember.

Enforcement Is Bipartisan

Some institutions assume that SCRA enforcement ebbs and flows with political administrations. The data says otherwise.

The first Trump administration initiated 24 SCRA enforcement actions. The Biden administration initiated 27. That is 51 enforcement actions in eight years, regardless of which party held the White House.

Under the current administration, servicemember protections have been explicitly identified as a priority. In April 2025, the DOJ Civil Rights Division listed “protecting the rights of members of the military” as a priority for its Housing and Civil Enforcement section. The same month, an internal CFPB memorandum listed “providing redress to service members and their families, and veterans” as a priority going forward. In May 2025, the CFPB stated it would “keep its enforcement and supervision resources focused on pressing threats to consumers, particularly servicemen and veterans.”

Per Skadden’s May 2025 analysis: “Servicemember Financial Protections Emerge as a Trump Enforcement Priority.”

There is no political cycle to wait out. Both parties compete on protecting servicemembers.

What Proactive Compliance Looks Like

The DOJ/CFPB letter describes what regulators want to see. Here is what that looks like in practice:

For financial institutions:

• Screen your loan portfolio against the DMDC to identify accounts held by active-duty servicemembers
• Automatically apply the 6% interest rate cap to all eligible pre-service obligations
• Re-screen periodically to catch new activations, mobilizations, and status changes
• Extend protections across all of a servicemember’s accounts when one is identified
• Document everything: verification results, rate adjustments, refund calculations

For property managers:

• Screen your tenant list against the DMDC to identify active-duty servicemembers in your portfolio
• Flag protected tenants before your team files an eviction, charges a fee, or withholds a deposit
• Monitor for status changes on an ongoing basis
• Process lease terminations under Section 3955 promptly and without penalties
• Maintain audit-ready documentation of every compliance action

The common thread: check first, act second. The DOJ/CFPB letter is telling institutions to stop relying on servicemembers to self-identify and start proactively screening their portfolios.

The Bottom Line

The December 2024 DOJ/CFPB joint letter is a recommendation, not a statutory mandate. But the distinction matters less than you might think.

Fifty-one enforcement actions. $484 million in recoveries. Penalties of $79,380 per violation under current regulations (28 CFR Section 85.5, effective July 2025), doubling to $158,761 for subsequent violations.

Regulators have told institutions what proactive compliance looks like. They have demonstrated, 51 times, what happens when institutions fall short. The gap between “recommendation” and “requirement” narrows with every enforcement action.

The question for every financial institution and property manager is straightforward: are you identifying protected servicemembers before you act, or are you waiting for a complaint?

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civrel.io screens portfolios against the Department of Defense database, monitors for military status changes, and flags protected individuals before adverse actions occur. To see how many servicemembers are in your portfolio, request a free scan.