SCRA Compliance Checklist for Lenders: 12 Requirements You Can't Miss

In December 2024, the DOJ and CFPB issued a joint letter to financial institutions reinforcing SCRA interest rate protections for servicemembers. The message was blunt: if you aren’t proactively identifying eligible borrowers and applying rate reductions, you are out of compliance.

This wasn’t a friendly reminder. It came after years of enforcement data showing that the lending industry is failing at SCRA compliance on a massive scale:

• Fewer than 10% of eligible auto loans received the legally required interest rate reduction (CFPB, 2007–2018 data)
• Only 6% of eligible personal loans received a rate reduction
• Reserve and National Guard members are paying $9 million extra in interest per year because lenders aren’t applying protections they’re legally required to provide
• Federal agencies have recovered over $400 million from institutions that violated the SCRA since 2011

The numbers speak for themselves: if you’re a lender, you almost certainly have a compliance gap. Here’s what you need to check. This checklist covers lender-specific requirements. for a full overview including all industries, see our complete SCRA compliance guide.

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1. Interest Rate Cap (50 U.S.C. §3937)

The rule: You cannot charge more than 6% per year on any financial obligation incurred before a borrower enters active-duty military service. This applies to mortgages, auto loans, personal loans, student loans, credit cards, and any other debt (see how SCRA and MLA obligations differ).

What counts as interest: The 6% cap includes service charges, renewal charges, and fees. not just the stated interest rate.

Key requirements:

• Forgive, don’t defer. The difference between 6% and the prior rate must be forgiven entirely. You cannot accrue the excess and charge it later.
• Mortgage extension. For mortgage obligations, the rate cap extends for one year after the period of military service ends.
• Credit card protection. For credit card accounts, the 6% cap applies to existing balances at the time of active-duty entry, including during permanent change of station.
• No retroactive charges. When the protection period ends, resume the original rate going forward. Never retroactively charge the forgiven interest.
• No negative credit reporting. Do not report SCRA protection status, reduced payments, or adjusted balances as delinquencies on credit reports.

How to trigger: Servicemembers may request protection by providing written notice and a copy of military orders. However, the CFPB has made clear that best practice is to proactively identify eligible borrowers rather than waiting for them to request it.

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2. Repossession Protection (50 U.S.C. §3952)

The rule: You cannot repossess a vehicle or other personal property from a servicemember during active duty without first obtaining a court order.

Key requirements:

• Verify military status before every repossession action. check DMDC, not just borrower self-reporting
• Court order required. No exceptions for non-judicial repossession during active duty
• Pre-service payment required. Protection applies when the borrower made at least one payment before entering military service
• Reserve/Guard protection. For Reservists, protection begins upon receiving call-up orders. not when active duty starts

Penalty for violation: Wrongful repossession without a court order triggers DOJ enforcement. Penalties range from $79,380 per first violation to $158,761 per subsequent violation (July 2025 inflation-adjusted), plus potential class action exposure.

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3. Foreclosure Protection (50 U.S.C. §3953)

The rule: You cannot foreclose on a mortgage or any obligation secured by property without a court order during active duty and for one year after service ends.

Key requirements:

• Court order required for all foreclosures. judicial and non-judicial. during the protection period
• One-year tail coverage. Protection extends one full year after the end of military service
• Pre-service obligations only. Only applies to obligations entered before the borrower reported for active duty
• Strict liability. Knowingly violating this provision is a criminal offense punishable by fine and up to one year imprisonment

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4. Default Judgment Protection (50 U.S.C. §3931)

The rule: Before obtaining a default judgment against any borrower who hasn’t appeared, you must file an affidavit of military service with the court.

Key requirements:

• File a military status affidavit in every case where the defendant doesn’t appear. stating whether they are or aren’t in military service, with supporting facts
• If status is unknown, state that in the affidavit. the court must then appoint an attorney before proceeding
• Verify status via DMDC. do not rely on assumptions or outdated records
• False affidavits are a federal crime. fine and up to one year imprisonment

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5. Proactive Identification. The New Standard

The December 2024 DOJ-CFPB joint letter signals a shift in expectations. It is no longer enough to process SCRA requests reactively. Regulators expect you to:

• Proactively screen your portfolio against the DMDC database to identify servicemembers eligible for rate reductions
• Notify eligible borrowers of their SCRA rights and the protections available to them
• Apply protections without waiting for a formal request when you have evidence of active-duty status
• Monitor continuously. Reservists and National Guard members cycle between civilian and active-duty status. A one-time check misses ongoing activations.

The CFPB’s finding that fewer than 10% of eligible auto loans received rate reductions tells regulators that most lenders are not doing this. That gap is where enforcement actions originate.

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6. Documentation and Audit Readiness

Every recent consent decree. from USAA ($149M) to Wells Fargo ($24.1M) to Bank of America ($69M). has required institutions to produce complete records of how they handled SCRA obligations.

• Maintain records of every DMDC verification. when it was run, what the result was, and what action you took
• Document every rate reduction. when applied, the original rate, the reduced rate, and the forgiven amount
• Log all borrower communications related to SCRA protections
• Retain records for at least 7 years. consent decrees often require audits going back 5+ years
• Be able to produce a complete audit trail on demand. if the DOJ or CFPB asks, you need to deliver

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7. Training and Policies

• Train all loan servicing, collections, and legal staff on SCRA obligations. annually at minimum
• Document your SCRA policies and procedures in writing
• Assign SCRA compliance ownership to a specific person or team. not diffused across departments
• Test your processes. conduct internal audits to verify that protections are actually being applied

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The Enforcement Track Record

If your institution hasn’t been investigated yet, the odds are shifting. Here’s what’s happened to the banks that got caught:

Institution	Total Penalties	Accounts Affected
USAA	$149.2M (combined regulatory actions + settlements)	210,000 people
JPMorgan Chase	~$87M ($31M DOJ + $56M class action)	Servicemembers received homes free and clear
Bank of America	$30M+	73,000+ accounts (OCC-2015-74, additional actions)
Wells Fargo	$24.1M	Multiple enforcement actions

USAA is a bank built specifically for military families. If they can’t handle SCRA compliance manually, no one can.

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Manual Compliance Is the Problem

The common thread in every enforcement action is the same: manual processes that were supposed to catch SCRA-eligible borrowers didn’t.

• Staff were supposed to check military status before repossessions. They didn’t always.
• Systems were supposed to flag accounts for rate reductions. The CFPB found fewer than 10% of eligible auto loans received the required reduction.
• Policies existed on paper. They weren’t consistently followed.

The DOJ doesn’t accept “we had a policy” as a defense. They look at outcomes. And the outcomes show that manual SCRA compliance fails at scale.

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Sources: DOJ-CFPB Joint Letter, December 2024; CFPB: Protecting Those Who Protect Us, Dec 2022; OCC Comptroller’s Handbook: SCRA; DOJ Servicemembers & Veterans Initiative

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Capital One paid $12 million for failing to cap interest rates on military loans. If a servicemember submitted a rate cap request tomorrow, would your team know exactly what to do?

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