Servicemember Financial Protections Emerge as a Trump Enforcement Priority

Key Points

• The CFPB and DOJ have recently prioritized enforcement of federal servicemember protections.
• The Servicemembers Civil Relief Act and Military Lending Act provide key protections such as interest rate caps, foreclosure and repossession restrictions, and rights to early lease termination. But they can pose complex compliance challenges.
• Increased military deployments may expand the pool of individuals eligible for SCRA protections and heighten compliance risk.
• Institutions may wish to review and enhance their SCRA and MLA compliance programs by conducting self-assessments, reviewing benefit denials and complaints, assessing clarity in customer communications and taking other proactive steps.

In recent weeks, Trump administration executive actions and internal agency directives have deprioritized enforcement of certain consumer financial services laws, regulations and theories. But one area where the administration has indicated that it will increase consumer financial regulation is servicemember protections.

On May 6, 2025, the Consumer Financial Protection Bureau (CFPB or Bureau) vowed to “keep its enforcement and supervision resources focused on pressing threats to consumers, particularly servicemen and veterans.” This followed an internal CFPB memorandum dated April 16, 2025, that listed “providing redress to service members and their families, and veterans” as a priority going forward.

The two key federal laws in this area are the Servicemembers Civil Relief Act (SCRA) and Military Lending Act (MLA). These laws provide a number of financial protections to servicemembers, including:

• Interest rate caps on certain obligations.
• Repossession and foreclosure protections.
• Rights to early termination of leases.
• Relief from certain other provisions in loans and other financial obligations.

However, the SCRA and MLA also present a number of compliance complexities and traps for the unwary, and violations have been enforced aggressively under both Republican and Democrat administrations in public orders calling for remediation and penalties.

This article describes key SCRA and MLA compliance risks, discusses recent actions by the Trump administration that signal increased focus and industry risk in connection with these laws and offers suggestions for mitigating compliance risk.

Servicemember Protections

Servicemembers Civil Relief Act

The SCRA provides broad servicemember protections in areas including financial obligations, housing, insurance, legal proceedings, tax and voting, and is enforced primarily by the Department of Justice (DOJ). Courts have held that the SCRA and its predecessor — the Soldiers’ and Sailors’ Civil Relief Act — must be “liberally construed to protect those who have been obliged to drop their own affairs to take up the burdens of the nation.”

With respect to financial obligations, key SCRA protections include:

• Six percent interest rate cap. On loans and other financial obligations taken out before the servicemember entered military service, the interest rate cannot exceed 6% per year during the period of military service. To obtain this benefit, the servicemember must notify the lender in writing and provide a copy of orders or a letter from the servicemember’s commanding officer providing the beginning date of active duty service.
• Foreclosure protections. On loans secured by real property taken out before the servicemember entered military service, foreclosure or seizure of the property is not valid during the military service period or for one year thereafter unless authorized by a court order, or the servicemember executes an SCRA-compliant waiver during or after military service.
• Repossession protections. On a retail installment contract for the purchase of an automobile where the servicemember paid an installment or deposit before entering military service, the vehicle cannot be repossessed for nonpayment or other breach of the agreement without a court order.
• Lease termination. Servicemembers may terminate an automobile lease without paying early termination charges or penalties if the person obtained the lease before entering military service and the servicemember is called to active duty or deployed to a military unit for 180 or more days, or receives certain permanent change-of-station orders. Also, servicemembers may terminate leases for residential or business premises without paying early termination charges or penalties if the person obtained the lease before entering military service and the servicemember is called to active duty or deployed to a military unit for 90 or more days, or receives certain permanent change of station orders.
  
  To obtain these benefits, the servicemember must provide written notice of lease termination and a copy of orders, or a letter from the person’s commanding officer, establishing his or her eligibility for the early lease termination.

The SCRA can present a number of complex compliance questions and operational issues, including those relating to:

• Addressing disconnects or potential indicia of fraud in the information and written materials provided by customers or on the Department of Defense’s (DOD) Defense Manpower Data Center (DMDC) website.
• Handling requests from a third party for SCRA benefits on a servicemember’s behalf.
• Ambiguities in documents regarding the dates of military service or deployment.
• Whether correspondence is from the servicemember’s “commanding officer.”

Military Lending Act

The MLA, along with its implementing DOD regulations, applies to active duty servicemembers on covered consumer loans and can be enforced by both the DOJ and CFPB. The MLA caps the Military Annual Percentage Rate (MAPR) at 36%, prohibits creditors from requiring servicemembers to agree to arbitration, bans prepayment penalties and mandatory arbitration agreements on loans, restricts a creditor’s ability to renew or refinance obligations and take a car title as security in some circumstances, and prohibits creditors from requiring military allotments for repayment, among other things.

Compliance-related issues under the MLA include those relating to:

• Calculation of the MAPR, which includes costs for voluntary ancillary products (unlike the Truth in Lending Act and Regulation Z).
• Procedures for determining whether an individual is a “covered borrower” under the MLA.
• The application of certain exceptions under the MLA.

Recent Administration Activities

Both Republican and Democrat administrations have in past years vigorously enforced federal servicemember protections, particularly the SCRA: The first Trump administration initiated 24 enforcement actions in this area and the Biden administration initiated 27 actions.

Consistent with this track record of aggressive servicemember protection enforcement across administrations, the CFPB has recently indicated that servicemember protections are a key priority. As noted above, the CFPB chief legal officer’s publicly reported internal memorandum dated April 16, 2025, states that one of the Bureau’s 11 enumerated priorities is to “focus on providing redress to service members and their families, and veterans.”

A few weeks later, the CFPB publicly doubled down on servicemember protections as one of the Bureau’s top consumer financial protection priorities in its May 6, 2025, press release (as noted above). In it, the Bureau stated that it is deprioritizing enforcement on the basis of a 2024 interpretive rule relating to “buy now, pay later” products and the Truth in Lending Act, and that the “Bureau will instead keep its enforcement and supervision resources focused on pressing threats to consumers, particularly servicemen and veterans.”

In addition, in April 2025 it was reported that a DOJ Civil Rights Division internal mission statement listed “protecting the rights of members of the military” as a priority for the Housing and Civil Enforcement section.

President Trump’s nominee for permanent CFPB director, Jonathan McKernan, has also stated that, if confirmed, he will “ensure that the CFPB takes all steps necessary to perform each of its statutorily assigned functions, including those relating to enforcement of the Military Lending Act.”

And while the CFPB is not charged by statute with enforcing violations of the SCRA specifically, McKernan has stated that the CFPB will carry out all “statutorily assigned functions that facilitate or otherwise relate to enforcement of the SCRA,” including monitoring complaints and coordinating with other federal agencies on servicemember issues.

Furthermore, plans announced by the administration to deploy members of the military to bolster border security could result in more individuals being eligible for SCRA benefits, thus enhancing practical compliance risk. With increased deployments, loan servicers can expect more requests for interest rate reductions under the SCRA in particular.

In addition, on December 5, 2024, the CFPB and DOJ issued a “notification letter” informing institutions of the 6% interest rate cap on certain obligations under the SCRA, recommending that the institutions offer certain “greater protections and benefits to servicemembers than those guaranteed by the SCRA” and requesting that institutions “evaluate your practices to ensure compliance with this federal law.” The “greater protections” recommended by the notification letter are:

• Proactively checking accounts using the DMDC to identify servicemembers eligible for the 6% interest rate cap and automatically applying the interest rate cap to those accounts, rather than requiring consumers to provide copies of their qualifying orders.
• Automatically applying the SCRA interest rate cap to all eligible accounts held at that institution by the servicemember if he or she invokes protections for any such account.

Looking Ahead and Mitigating Risk

Violations of federal servicemember protections can expose consumer financial services providers to enforcement actions and private litigation, fines and restitution, and considerable reputational harm. In light of the expected continued and increased enforcement focus on servicemember protections, institutions may wish to consider some or all of the following actions in an effort to mitigate potential risk:

• Self-assessment. Conduct a comprehensive self-assessment of the institution’s SCRA and MLA policies and procedures, including those on customer communications, benefit request intake, compliance and monitoring activities, and audit.
• Complaints. Conduct root cause analysis on complaints under the SCRA and MLA to assess risk of potential compliance gaps and customer service issues.
• Second review of benefit denials. Conduct second review/quality review covering some or all denied requests for benefits under the SCRA.
• Policies and procedures. Review policies and procedures, job aids and training for the SCRA and MLA for clarity of instructions to employees and a goal of minimizing or eliminating employee discretion.
• Correspondence. Examine customer correspondence relating to requests for SCRA benefits, including initial documentation request letters, denial notifications and requests for additional information, with a particular focus on providing specificity regarding information needed to establish eligibility for SCRA benefits where applicable. Lack of clarity in denial and information request letters has been a focus in DOJ SCRA enforcement actions and can be a driver of servicemember complaints.
• Six percent cap cushion. Cap interest on eligible accounts to an amount slightly below 6% (e.g., 5.9%) in order to leave room for rounding or other minor calculation variations or errors without exceeding the statutory 6% cap.
• Information from DMDC. Systematically check the DMDC website to assess potential protection under the SCRA at multiple points (rather than at one time only) during the default servicing process.
  
  In addition, the SCRA authorizes financial institutions to rely on information regarding the servicemember’s status that it proactively gathers from the DMDC website to determine eligibility for the 6% interest rate cap, rather than waiting for the servicemember to provide that information, and provides a statutory safe harbor from liability for DMDC website errors in certain circumstances.
• Denial rates. Monitor SCRA benefit denial rates and investigate significant increases in those rates, which may identify compliance issues or other process gaps.

This memorandum is provided by Skadden, Arps, Slate, Meagher & Flom LLP and its affiliates for educational and informational purposes only and is not intended and should not be construed as legal advice. This memorandum is considered advertising under applicable state laws.