NCUA SCRA Guidance for Credit Unions: What Examiners Look For

Credit unions serve a disproportionately large military membership. Whether you’re a defense credit union chartered to serve a specific installation or a community credit union near a military base, your membership likely includes active-duty servicemembers, reservists, National Guard members, and their families.

That military membership creates a specific regulatory obligation: compliance with the Servicemembers Civil Relief Act. And your regulator, the NCUA, examines for it.

This guide covers what the SCRA requires of credit unions, what NCUA examiners look for during examinations, where credit unions have faced enforcement, and how to build a compliance program that passes examination and protects your members.

The SCRA Applies to Credit Unions

The Servicemembers Civil Relief Act is a federal law that applies to all creditors: banks, credit unions, auto lenders, property managers, and any entity that extends credit or takes adverse actions against consumers. Credit unions are not exempt by virtue of their member-owned structure or their mission to serve military communities.

The SCRA protects active-duty servicemembers (Army, Navy, Air Force, Marines, Coast Guard, Space Force), activated National Guard and Reserve members, and commissioned officers of the Public Health Service and NOAA. Protection begins on the date a servicemember enters active duty and generally ends on the date of discharge or release, with certain provisions extending beyond discharge.

For credit unions, the SCRA’s protections apply across every product line: auto loans, mortgages, credit cards, personal loans, home equity lines, and any other extension of credit.

Core SCRA Obligations for Credit Unions

1. Interest Rate Cap: 6% Maximum (50 U.S.C. Section 3937)

When a member took out a loan before entering active duty, the credit union must cap the interest rate at 6% per year during the period of military service, upon the member’s written request with a copy of military orders.

Key requirements:

• The excess interest above 6% must be forgiven, not deferred, not added to the balance, not collected later
• Monthly payments must be recalculated downward to reflect the reduced rate
• The cap applies retroactively to the date the servicemember entered active duty, not the date of the request
• Members may request the rate cap at any time during service or within 180 days after release from active duty (Section 3937(b)(2))
• The cap applies to all pre-service obligations: auto loans, credit cards, personal loans, mortgages, and HELOCs

A credit union may petition the court for relief from the rate cap under Section 3937(c) if military service has not materially affected the member’s ability to pay, but the credit union cannot deny the cap unilaterally.

Where credit unions have failed: BayPort Credit Union settled with the DOJ in 2022 after charging interest exceeding 6% to 24 servicemembers (21 interest rate violations and 3 vehicle repossession violations). The settlement totaled $109,443 ($69,443 in restitution plus a $40,000 civil penalty). Notably, the DOJ found that BayPort’s internal policies incorrectly stated that a servicemember must be deployed to a combat zone to be eligible for a Section 3937 rate reduction, a fundamental misunderstanding of who qualifies for SCRA protection. If your policies define eligibility incorrectly, every decision based on that policy is a potential violation.

For a deep dive on implementing the rate cap across all product lines, see our SCRA Interest Rate Cap guide for credit unions.

2. Court Order Before Repossession (50 U.S.C. Section 3952)

When a servicemember took out an auto loan before entering active duty and made at least one payment before service, the credit union cannot repossess the vehicle without first obtaining a court order. Self-help repossession (sending a recovery agent, using GPS to locate and tow, disabling a starter interrupt) is prohibited.

Where credit unions have failed: Hudson Valley Federal Credit Union settled with the DOJ in 2018 after repossessing vehicles from seven servicemembers without court orders. The settlement required $65,000 in member restitution plus a $30,000 civil penalty. BayPort Credit Union’s 2022 settlement also included repossession violations. In at least one case, BayPort repossessed a vehicle from a military base while knowing the borrower was a servicemember.

3. Default Judgment Protection (50 U.S.C. Section 3931)

Before pursuing any court action against a member (deficiency judgment, foreclosure, collections suit), the credit union must file an affidavit with the court stating whether the defendant is in military service, based on actual DMDC verification. Filing a false military status affidavit is a federal offense under Section 3931(c).

4. Foreclosure Protection (50 U.S.C. Section 3953)

For credit unions that hold mortgage loans, foreclosure on a servicemember’s property is prohibited during military service and for one year after the end of service (this period has been extended by Congress multiple times and may change), except by court order.

What NCUA Examiners Look For

The NCUA examines credit unions for SCRA compliance as part of its consumer compliance examination program. The FFIEC issued uniform interagency examination procedures for the SCRA, and the NCUA applies these during its examination cycle.

The Examination Framework

NCUA examiners evaluate SCRA compliance across several dimensions:

1. Written policies and procedures

• Does the credit union have a written SCRA compliance policy?
• Does the policy cover all relevant product lines (auto loans, mortgages, credit cards, personal loans)?
• Does the policy define when and how military status verification is required?
• Is the policy accessible to all relevant staff?
• Is the policy reviewed and updated regularly?

2. Staff training

• Are employees who handle collections, repossessions, foreclosures, and interest rate adjustments trained on SCRA requirements?
• Is training provided at hire and annually?
• Are training records maintained?

3. Military status verification procedures

• Does the credit union verify military status through the DMDC database before adverse actions?
• Is the verification process documented?
• Does the credit union have procedures for when a member self-identifies as military?

4. Interest rate cap processing

• Does the credit union have a process for receiving and acting on Section 3937 requests?
• Are rate reductions applied correctly (retroactive, forgive excess, recalculate payments)?
• What is the processing timeline? (The DOJ considers delays of 60+ days unreasonable)
• Are all pre-service obligations covered, including credit cards and HELOCs?

5. Repossession and foreclosure procedures

• Does the credit union verify military status before every repossession?
• Are court orders obtained when required under Section 3952?
• For mortgage-holding CUs, are foreclosure protections observed?

6. Documentation and record retention

• Are DMDC verifications documented with dates, results, and the account they relate to?
• Are interest rate cap requests and military orders retained?
• Are court filings and military status affidavits documented?
• Can you produce a complete audit trail on demand for any account?

7. Complaint handling

• Does the credit union have a process for handling SCRA-related complaints?
• Are complaints tracked and resolved?

Examination Triggers

Certain factors increase the likelihood that examiners will focus on SCRA compliance:

• Military membership concentration. Credit unions near military installations or with charters that specifically serve military communities will face heightened scrutiny.
• Prior examination findings. A previous examination that identified SCRA weaknesses will result in follow-up review.
• Complaint history. Member complaints or referrals from military legal assistance offices trigger targeted examination.
• High repossession or collections volume. A credit union with significant collections activity has more opportunities for SCRA violations and will receive more scrutiny.

Credit Union SCRA Enforcement Actions

The DOJ has brought SCRA enforcement actions specifically against credit unions:

Credit Union	Year	Settlement	Violation	Members Affected
Hudson Valley FCU	2018	$95,000	Vehicle repossession without court orders	7
BayPort Credit Union	2022	$109,443	Interest rate violations + vehicle repossession without court orders	24

These are smaller settlements than the bank-scale cases ($35 million for Bank of America, $9.5 million for Wells Fargo), but they demonstrate that the DOJ pursues SCRA violations against credit unions regardless of institution size.

Additionally, USAA Federal Savings Bank, which serves a predominantly military membership, faced 546 SCRA violations identified during an OCC examination in 2019, contributing to an $85 million civil money penalty. While USAA is a federal savings bank rather than a credit union, its experience is instructive for any financial institution serving military members. USAA subsequently settled a $64.2 million class action lawsuit in 2024 for SCRA-related overcharges.

See our SCRA Enforcement Tracker for the complete record of every DOJ settlement.

The Credit Union Difference: Higher Risk, Higher Stakes

Credit unions face unique SCRA dynamics that banks do not:

Concentrated military membership. A community credit union near Fort Liberty, Joint Base Lewis-McChord, or Naval Station Norfolk may have 30-50% of its membership in active military service. A bank with the same SCRA compliance gap would have fewer affected accounts. For military-adjacent credit unions, the SCRA is not a niche compliance requirement. It is a core operational obligation.

Member trust. Credit unions exist to serve their members. A servicemember who discovers that their credit union repossessed their vehicle while they were deployed, or charged illegal interest while they were serving, experiences a breach of trust that goes beyond a regulatory violation. For credit unions, SCRA compliance is both a legal obligation and a mission obligation.

Smaller compliance teams. Most credit unions do not have dedicated SCRA compliance staff. The same person who handles BSA/AML, fair lending, and TILA/RESPA also handles SCRA. The risk is not that the person doesn’t know the law; it’s that the process depends on one person remembering to check, and manual processes fail at scale.

Product breadth. A credit union that offers auto loans, mortgages, credit cards, personal loans, and HELOCs must apply SCRA protections across all five product lines. Each product has different triggers and different workflows. The interest rate cap works differently for a credit card than for an auto loan. Repossession requires a court order; credit card charge-off does not. A compliance program that covers auto loans but misses credit cards leaves the credit union exposed, exactly the gap that cost Capital One $12 million.

Building a Compliance Program

A credit union SCRA compliance program should include six components, the same six that the DOJ requires in every SCRA consent decree:

1. Written SCRA Policy

Cover all product lines. Define when DMDC verification is required. Specify how interest rate cap requests are processed. Make it accessible to every collections, lending, and servicing employee.

2. Staff Training

Train everyone in the collections and lending chain: loan officers, collections staff, member service representatives. Cover the rate cap, repossession restrictions, default judgment requirements. Train at hire. Retrain annually. Document it. See our free SCRA training videos for staff training content.

3. Military Status Verification

Verify through DMDC before every repossession, every court filing, every adverse credit action. Build the check into your workflow so it cannot be skipped. Manual checks work for small credit unions, but they can be forgotten. Automated verification prevents the gap.

4. Interest Rate Cap Processing

Build a defined workflow: receive request and military orders, verify via DMDC, reduce rate retroactively, forgive excess interest, recalculate payments, confirm to member in writing. Process within 30 days. Apply across all pre-service products: auto, mortgage, cards, personal, HELOC.

5. Documentation & Record Retention

Document every DMDC check, every rate cap request, every adverse action decision. Retain for at least 5 years. When the examiner asks “show me the DMDC check for this repossession,” you need to produce it.

6. Monitoring & Self-Assessment

Audit a sample of collections actions and rate cap requests quarterly. Verify DMDC checks were performed. Review processing timelines. Conduct an annual self-assessment. Use our free SCRA Self-Assessment Checklist as a starting framework.

The MLA Connection

Credit unions should also be aware that the Military Lending Act (MLA) creates additional obligations distinct from the SCRA. While the SCRA protects servicemembers from adverse actions on pre-service obligations, the MLA caps the Military Annual Percentage Rate (MAPR) at 36% on credit extended during active duty. For a detailed comparison, see our guide on SCRA vs. MLA.

Key differences:

	SCRA	MLA
Applies to	Pre-service obligations	Credit extended during service
Rate cap	6% on pre-service debt	36% MAPR on covered credit
Coverage	Active-duty servicemembers	Active-duty + dependents
Enforced by	DOJ, NCUA, OCC, CFPB, state AGs	DOD, CFPB, FTC, NCUA, and other banking regulators

The NCUA examines for both SCRA and MLA compliance. A comprehensive military compliance program covers both.

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BayPort Credit Union paid $109,443 for an incorrect SCRA rate cap policy, and they only have a few thousand members. What would an NCUA exam find in your SCRA procedures?

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Sources: NCUA Federal Consumer Financial Protection Guide: SCRA (ncua.gov); NCUA Letters to Credit Unions: Interagency Examination Procedures; OCC Comptroller’s Handbook: Servicemembers Civil Relief Act (March 2021); DOJ Press Releases: United States v. Hudson Valley Federal Credit Union (2018), United States v. BayPort Credit Union (2022); OCC News Release 2020-135 (USAA); 50 U.S.C. Sections 3901-4043.

This guide is for educational purposes only and does not constitute legal advice. Consult qualified legal counsel for guidance specific to your institution.