[Senate Hearing 113-112]
[From the U.S. Government Publishing Office]


                                                        S. Hrg. 113-112
 
 PRESERVING THE RIGHTS OF SERVICEMEMBERS, VETERANS, AND THEIR FAMILIES 
                      IN THE FINANCIAL MARKETPLACE 

=======================================================================

                                HEARING

                               BEFORE THE

                     COMMITTEE ON VETERANS' AFFAIRS
                          UNITED STATES SENATE

                    ONE HUNDRED THIRTEENTH CONGRESS

                             FIRST SESSION

                               __________

                             JULY 31, 2013

                               __________

       Printed for the use of the Committee on Veterans' Affairs
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                     COMMITTEE ON VETERANS' AFFAIRS

                 Bernard Sanders, (I) Vermont, Chairman
John D. Rockefeller IV, West         Richard Burr, North Carolina, 
    Virginia                             Ranking Member
Patty Murray, Washington             Johnny Isakson, Georgia
Sherrod Brown, Ohio                  Mike Johanns, Nebraska
Jon Tester, Montana                  Jerry Moran, Kansas
Mark Begich, Alaska                  John Boozman, Arkansas
Richard Blumenthal, Connecticut      Dean Heller, Nevada
Mazie Hirono, Hawaii
                    Steve Robertson, Staff Director
                 Lupe Wissel, Republican Staff Director



                            C O N T E N T S

                              ----------                              

                             July 31, 2013
                                SENATORS

                                                                   Page
Sanders, Hon. Bernard, Chairman, U.S. Senator from Vermont.......     1
Boozman, Hon. John, U.S. Senator from Arkansas...................     2
    Prepared statement...........................................     2
Hirono, Hon. Mazie, U.S. Senator from Hawaii.....................    34

                               WITNESSES

Petraeus, Hollister K., Assistant Director, Office of 
  Servicemember Affairs, Consumer Financial Protection Bureau....     3
    Prepared statement...........................................     5
    Response to posthearing questions submitted by:
      Hon. John D. Rockefeller IV................................     9
      Hon. Mark Begich...........................................     9
      Hon. Richard Blumenthal....................................    10
      Hon. Mazie Hirono..........................................    11
Kantwill, Col. Paul, Director of Legal Policy, Office of the 
  Undersecretary for Personnel and Readiness, U.S. Department of 
  Defense........................................................    12
    Prepared statement...........................................    14
    Response to posthearing questions submitted by:
      Hon. Mark Begich...........................................    18
      Hon. Richard Blumenthal....................................    19
      Hon. Mazie Hirono..........................................    21
    Response to request arising during the hearing by Hon. John 
      Boozman....................................................    36
Halperin, Eric, Special Counsel for Fair Lending, Civil Rights 
  Division, U.S. Department of Justice...........................    24
    Prepared statement...........................................    26
    Response to posthearing questions submitted by:..............
      Hon. Bernard Sanders.......................................    29
      Hon. John D. Rockefeller IV................................    32
      Hon. Mazie Hirono..........................................    32
Leonard, Paul, Senior Vice President, Housing Policy Council, the 
  Financial Services Roundtable..................................    39
    Prepared statement...........................................    41
    Response to posthearing questions submitted by:
      Hon. John D. Rockefeller IV................................    43
      Hon. Mark Begich...........................................    44
      Hon. Richard Blumenthal....................................    45
      Hon. Mazie Hirono..........................................    45
    Response to request arising during the hearing by Hon. Bernard
       Sanders...................................................    49


 PRESERVING THE RIGHTS OF SERVICEMEMBERS, VETERANS, AND THEIR FAMILIES 
                      IN THE FINANCIAL MARKETPLACE

                              ----------                              


                        WEDNESDAY, JULY 31, 2013

                                       U.S. Senate,
                            Committee on Veterans' Affairs,
                                                    Washington, DC.
    The Committee met, pursuant to notice, at 9:55 a.m., in 
room SR-418, Russell Senate Office Building, Hon. Bernard 
Sanders, Chairman of the Committee, presiding.
    Present: Senators Sanders, Hirono, and Boozman.

          OPENING STATEMENT OF HON. BERNARD SANDERS, 
              CHAIRMAN, U.S. SENATOR FROM VERMONT

    Chairman Sanders. The hearing will come to order a little 
bit early because we have got votes at 10:45 and then the 
President is coming to a caucus later and that I am going to 
have to attend.
    I want to thank all of our panelists and everyone with us 
today. Senator Boozman and other Senators will be joining us 
for the discussion of an issue that many of us feel very 
strongly about.
    As everyone knows, we passed important legislation which 
essentially says that when men and women go off to war they are 
not going to get ripped off at home, not by financial 
institutions and not by people trying to take advantage of 
benefits which they have earned. I can tell you firsthand, as 
you all know, people go off to war, families are left with 
kids, they are struggling back home, they are vulnerable, and 
we are not going to allow those people to be taken advantage 
of.
    The panelists that we have here today have done a wonderful 
job in trying to protect those servicemembers and we are going 
to hear from them in a moment.
    I remain deeply troubled by the violations of the SCRA that 
occurred within the mortgage lending industry within the past 
few years. In a 2012 report, the GAO identified over 14,000 
instances of financial institutions failing to properly reduce 
servicemembers' mortgage interest rates, as the law provides, 
and over 300 improper foreclosures.
    These violations are completely unacceptable. 
Unfortunately, the challenges faced by our servicemembers do 
not end there. The Consumer Financial Protection Bureau has 
identified similar practices and concerns within the student 
loan servicing market. This unacceptable behavior also must 
end. We must continue to improve education about the 
protections of the SCRA, industry must improve its compliance 
with the Act, and finally, aggressive enforcement of these 
protections must continue when violations occur.
    I think we are all in agreement that when men and women put 
their lives on the line defending our country, they should not 
be subjected to the types of behavior we have seen in the past. 
that is why today's discussion about how we can continue to 
improve and enhance the SCRA is so terribly important.
    I am going to end my remarks at this point. Senator 
Boozman, I want to give the mic over to you and then I would 
like us to hear from the panel.

                STATEMENT OF HON. JOHN BOOZMAN, 
                   U.S. SENATOR FROM ARKANSAS

    Senator Boozman. Yes, sir, I want to agree and I want to 
thank you and Ranking Member Burr for making it so that we can 
have this very, very important hearing. In the interest of 
time--because we have votes not too far from now, and also I 
know the President is coming over--so I am going to put my 
statement in the record.
    Briefly, I agree with you so much in the sense this is so 
important. Servicemembers--my dad did 20 years in the Air 
Force. This is a family affair and it is difficult. It is a 
unique situation. Families are separated, especially with the 
op temp (operating temperature) that we have going on right 
now, taking care of finances, you know, those discussions that 
most of us in everyday life take for granted is simply much 
more difficult in that situation.
    So, we do want to protect our servicemembers. We want to 
make sure that they are treated right. They have got enough to 
deal with without unscrupulous predators preying on them. So, 
again, thank you for being here, and with your permission, I 
will put my statement in the record, Mr. Chairman.
    Chairman Sanders. Absolutely. And thank you very much, 
Senator Boozman.
    [The prepared statement of Senator Boozman follows:]
               Prepared Statement of Hon. John Boozman, 
                       U.S. Senator from Arkansas
    Mr. Chairman, thank you for holding this hearing today. And thank 
you to all of our witnesses and Members of the Committee who share the 
universal principle that our active duty servicemembers and their 
families should have the tools they need to make sound financial 
decisions and adequate protections from abusive financial practices.
    From the ongoing efforts and the testimony before us today, it is 
clear that there continues to be a strong public private partnership to 
serve every member of the military.
    Whether it is legal protections from foreclosure during military 
service, caps on loan interest rates, and laws that discourage 
predatory lending, or initiatives to increase financial literacy among 
servicemembers and private sector initiatives to better serve our 
military personnel--there are rigorous ongoing efforts to ensure that 
our servicemembers are able to balance the challenges that accompany 
military service, as well as the financial strains that most working 
class families in America deal with every day.
    At the same time, military service is unique and the financial 
strains military families face--because they choose to serve our Nation 
in uniform--can often be more stressful than those experienced by 
civilian families. Furthermore, the range of benefits for financial 
services and economic opportunity can make them targets for those who 
seek to take advantage. It is therefore appropriate for us to have 
public and private mechanisms in place to protect them from predatory 
lenders and empower them to make the right decisions.
    At the same time, as we seek to implement these programs, we must 
ensure that these programs empower servicemembers and do not restrict 
their economic freedom and options, whether it be in their choice of 
financial tools or how they choose to exercise the economic opportunity 
benefits that they have earned. Our military are selective, and every 
member of our military is able in mind and body. We all care so deeply 
for the wellbeing of our servicemembers and their families and I 
believe that everyone here wishes to serve them in good faith. At the 
same time, we should be cautious that we do not impose rules and 
regulations on servicemembers and the institutions that serve them 
which could inadvertently limit their choices and economic freedom. 
Just because bad actors have inappropriately and illegally sought to 
take advantage of the benefits for which these men and women have 
sacrificed so greatly, we shouldn't limit their options in our efforts 
to help them.
    We should continue to focus on economic empowerment and focused 
programs that target those bad actors. We should improve financial 
literacy training for servicemembers, increase interagency cooperation 
of SCRA laws, and ensure that the programs we currently have are 
working effectively, and we should work with the financial industry and 
those who wish to be a part of the solution to enable better compliance 
with the law.
    In closing, I look forward to this discussion today and am 
confident that it will lead us all in the direction of better serving 
and protecting servicemembers and their families, and improve our 
ability to conduct effective oversight of Federal agencies.

    Thank you again Mr. Chairman for holding this hearing.

    Chairman Sanders. We are going to hear now from our very 
distinguished panel. First we will hear from Mrs. Holly 
Petraeus, Assistant Director, Office of Servicemember Affairs 
at the Consumer Financial Protection Bureau. Also with us is 
Colonel Paul Kantwill, Director of Legal Policy, Office of the 
Undersecretary for Personnel and Readiness of the Department of 
Defense. We will then hear from the final witness on this 
panel, Eric Halperin, Special Counsel for Fair Lending in the 
Civil Rights Division at the Department of Justice.
    With that, Mrs. Petraeus, let us begin with you.

STATEMENT OF HOLLISTER K. PETRAEUS, ASSISTANT DIRECTOR, OFFICE 
 OF SERVICEMEMBER AFFAIRS, CONSUMER FINANCIAL PROTECTION BUREAU

    Ms. Petraeus. Chairman Sanders, Ranking Member Boozman, 
thank you for the opportunity to speak with you today. The 
Office of Servicemember Affairs, or OSA, as we call it at the 
CFPB, has three missions: to educate and empower servicemembers 
and their families to make better informed consumer decisions; 
to monitor military complaints to the Bureau and the responses 
to those complaints; and to coordinate with Federal and State 
agencies on consumer protection measures for the military.
    Concerning our education mission, my team worked with DOD 
to create the financial module for their Transition Assistance 
Program, or TAP. We are also working on an initiative to offer 
financial coaching services to recently transitioned veterans.
    As for complaints, in the last 2 years, the Bureau received 
approximately 4,500 complaints from veterans and their family 
members. About 49 percent of those complaints concerned 
mortgages, followed by 18 percent credit cards, 13 percent bank 
account servicing issues, and 8 percent credit reporting 
issues.
    We have helped veterans who complained to us secure 
hundreds of thousands of dollars in monetary relief, as well as 
non-monetary relief. For example, a vet from North Carolina had 
a bank fee of nearly $2,000 that should have been waived 
because he was disabled. Within weeks of his filing a complaint 
with us, the bank removed the fee and refunded the interest 
charged.
    As to coordinating with other Federal and State agencies, 
OSA has worked with Treasury and the Federal Housing Finance 
Agency on mortgage issues, with DOJ on SCRA issues, and with 
the VA on veterans issues, and obviously we talk all the time 
with DOD.
    In the States, OSA has had great support from the Attorneys 
General, with 16 of them joining me at events in military 
communities, and from the State Directors of Veterans Affairs, 
and we work with the veteran service organizations, too. We 
have had a couple of town halls specifically for them.
    I also did a telephone town hall last year with Senators 
Rockefeller and Manchin that reached thousands of veterans in 
West Virginia, and I have just added a veterans outreach 
specialist to my staff so we can do more.
    In the last 2\1/2\ years, I have traveled to 28 States and 
about 60 military communities in the United States. One issue 
that has been raised consistently is aggressive marketing to 
veterans by certain institutions of higher education seeking 
those with G.I. Bill benefits. There is an extra incentive for 
for-profit colleges, in particular, to chase after military 
students because of the 90/10 proprietary college Federal 
funding cap. And I have heard of some very aggressive tactics 
to recruit them.
    I spoke with a woman from the VA in Nevada who was 
overseeing vocational rehabilitation for vets. She told me that 
she had patients with Traumatic Brain Injury and PTSD who had 
been persuaded to sign up for college classes and did not even 
remember it. That did not stop the colleges from pressing them 
for full payment, even though they were not regularly attending 
classes.
    Some schools were also pushing her patients to enroll in 
master's degree programs, though she believed they were not 
capable of doing the work. Their tactics were aggressive enough 
that she described it as, ``tormenting veterans.''
    Another area of concern is that of financial institutions 
failing to provide SCRA protections to those who qualify for 
them, as you mentioned, and we do work with DOJ on these 
issues.
    SCRA compliance problems are not limited to mortgage 
servicing. In the student loan servicing market, we have heard 
of lenders giving out incorrect or misleading information or 
even refusing to grant SCRA protections.
    Another issue that I have heard about frequently concerns 
the veteran's benefit known as Aid and Attendance. Individuals 
and companies use it as a hook to sell their services to 
elderly veterans.
    It may involve offering to help them qualify for Aid and 
Attendance, if they have too much money, by taking control of 
their assets and moving them into a trust where they cannot 
access them, as in a recent case in Washington State, or some 
retirement homes are now using the lure of Aid and Attendance 
to get veterans to move in on the premise that they will get 
the benefit and they will pay for everything. If the benefit is 
denied, this leaves the veteran in the position of being unable 
to afford to remain in the facility.
    We have also seen a flood of advertising in the past year 
urging those with VA home loans to refinance. The Bureau and 
the FTC did a joint sweep of the ads which resulted in letters 
to a number of lenders concerning potential violations.
    One last area of concern is pension advances. Offers to pay 
military retirees a lump sum in return for their future monthly 
retirement payments. These offers usually amount to pennies on 
the dollar and may be in violation of the law regarding 
assignment of pension benefits.
    To conclude, the Office of Servicemember Affairs is working 
hard to fulfill its missions of education and consumer 
protection. Our veterans have done extraordinary service for 
our country and it is an honor for us at OSA to serve them and 
their families. Thank you for the opportunity to testify before 
the Committee.
    [The prepared statement of Ms. Petraeus follows:]
Prepared Statement of Hollister K. Petraeus, Assistant Director, Office 
     of Servicemember Affairs, Consumer Financial Protection Bureau
    Chairman Sanders, Ranking Member Burr, and distinguished Members of 
the Committee, thank you for the opportunity to speak with you today 
about the Office of Servicemember Affairs at the Consumer Financial 
Protection Bureau (Bureau).
    Many of you already know me as I've testified before you on other 
committees, and I've also had the opportunity to visit with some of you 
in your home States. But for those of you who are not familiar with my 
office, I'd like to take a few moments to tell you what we do.
    As defined in the Dodd-Frank Act, the Office of Servicemember 
Affairs at the Bureau is responsible for:

     Developing and implementing initiatives to educate and 
empower servicemembers and their families to make better-informed 
decisions regarding consumer financial products and services;
     Monitoring military complaints about consumer financial 
products and services, including the Bureau and other Federal or State 
agency responses to those complaints; and
     Coordinating the efforts of Federal and State agencies 
regarding consumer protection measures relating to consumer financial 
products and services offered to, or used by, servicemembers and their 
families.

    Concerning our education mission, in an effort that I think would 
be of interest to this Committee, my team worked with the Department of 
Defense (DOD) to create a financial module to be included in the 
recently revised Transition Assistance Program for those departing the 
military. And, in a logical follow-on, this year we're working on an 
initiative to offer financial coaching services to recently-
transitioned veterans, to ensure they have some professional financial-
planning support during the economically vulnerable time after they 
leave the service.
    As for our complaint monitoring, from July 21, 2011 through July 6, 
2013, the Bureau received approximately 4,516 complaints from veterans 
and their family members. The complaint volume from veterans has 
steadily increased over time, with 262 complaints received in 2011, 
2,315 in 2012, and 1,939 complaints in the first six months of 2013. 
About 49 percent of the complaints from veterans have been mortgage 
complaints, followed by 18 percent credit card complaints, and 13 
percent bank account or service complaints. We only started accepting 
complaints about credit-reporting companies in October 2012, but credit 
reporting is already the 4th highest complaint category for veterans at 
8 percent, and is trending upward.
    We have helped veterans who filed complaints secure hundreds of 
thousands of dollars in monetary relief. We've also assisted many 
others to obtain non-monetary relief, for example having errors on a 
credit report corrected, which helps them resolve problems that may 
have been affecting them for months or even years.
    But these complaint statistics aren't just numbers to us: they 
represent military and veteran families and we know the impact consumer 
financial issues can have on their quality of life. In one complaint, a 
veteran from North Carolina was struggling with his bank for months 
over a fee of nearly $2,000 that should have been waived because he was 
disabled. Within weeks of his filing a complaint with the Bureau, the 
bank removed the fee and refunded the veteran for the interest that was 
charged in error. Although we can't promise specific results, I 
encourage servicemembers, veterans, retirees, and military spouses to 
go to consumerfinance.gov and file a complaint if they are having 
problems with a mortgage, credit card, student loan, or other consumer 
financial product. And I think it's fair to say that our Consumer 
Response team is making a real difference for many veterans and their 
families.
    As to my office's third mission--coordinating with other Federal 
and State agencies--I have spent a significant amount of time doing 
just that. Our Office of Servicemember Affairs has worked with Federal 
agencies such as the Department of the Treasury and the Federal Housing 
Finance Agency on mortgage issues, with the Department of Justice (DOJ) 
on Servicemembers Civil Relief Act issues, and with the Department of 
Veterans Affairs (VA) concerning veterans' issues. And obviously my 
staff and I talk all the time with DOD.
    In the States, I've had great support from the Attorneys General, 
with 16 of them personally joining me at events in military 
communities. In fact, on July 1st I was at MacDill Air Force Base in 
Florida at the invitation of Attorney General Pam Bondi to watch 
Governor Scott sign a bill to provide enhanced penalties for those who 
use deceptive or unfair trade practices in their dealings with 
servicemembers, veterans, and their families.
    I've also had a very good relationship with the State Directors of 
Veterans Affairs, meeting with almost a dozen of them in their home 
States as well as addressing their national conference in May. And I 
work with the veterans' service organizations (VSOs), as well. I've 
done presentations to the Iraq and Afghanistan Veterans of America, the 
Vietnam Veterans of America, and the American Legion. We have also had 
a couple of town halls specifically for VSOs and intend to do more.
    Speaking of town halls, I participated in a telephone town hall 
last year with Senator Manchin and Senator Rockefeller that reached 
thousands of veterans in the state of West Virginia, and I am eager to 
engage with veterans through initiatives such as these whenever I have 
the opportunity to do so. I should add that I have just added a 
veterans' outreach specialist to my staff so we can do more work on 
consumer protections and financial education for veterans.
    Now, let me talk specifically about the issues that have come up 
during my travels to 28 States and about 60 military communities, where 
I have heard directly in the past two years from servicemembers, 
veterans, military retirees, and their families.
    One issue that has been raised consistently throughout my travels 
is concern over aggressive marketing to military personnel, veterans, 
and their families by certain institutions of higher education seeking 
to attract individuals with access to GI Bill benefits. These 
institutions are pushing not only their educational programs, but also, 
in many cases, expensive private student loans to pay for the amount of 
tuition and fees not covered by the GI Bill.
    There is an extra incentive for for-profit colleges, in particular, 
to chase after military students because of the 90-10 proprietary 
college Federal funding cap--a requirement that for-profit colleges get 
at least 10 percent of their revenue from sources other than Title IV 
Federal education funds administered by the Department of Education 
(ED). Military GI Bill and Tuition Assistance benefits are not Title IV 
funds, so they fall into the 10 percent category that these colleges 
need to fill--and we have heard of some very aggressive tactics to put 
GI Bill recipients into classes.
    For example, a year ago when I was out in Nevada with Attorney 
General Catherine Cortez Masto, I spoke with a woman from the VA 
Regional Office there who was overseeing vocational rehabilitation for 
veterans. She told me that she had patients with Traumatic Brain Injury 
(TBI) and Post Traumatic Stress Disorder (PTSD) who had been persuaded 
to sign up for college classes, and didn't even remember doing so. That 
didn't stop the colleges from pressing them for full payment, even 
though they were not regularly attending classes. She said that some 
schools were also pushing her patients to enroll in Master's Degree 
programs even though she believed they were not capable of doing the 
work at that time. Their tactics were aggressive enough that she 
described it as ``tormenting veterans.'' Obviously it distressed her to 
see her patients pressed to spend their GI Bill benefits in this 
manner.
    On the same topic, in April 2012 I went to Fort Stewart, Georgia to 
watch the President sign an Executive Order 13607, ``Establishing 
Principles of Excellence for Educational Institutions Serving 
Servicemembers, Veterans, Spouses, and Other Family Members.'' The 
Order directed the Departments of Defense, Veterans Affairs, and 
Education, in consultation with the Bureau and the Attorney General, to 
take steps to enable servicemembers, veterans and their families to get 
the information they need about the schools where they spend their 
education benefits. The Order also strengthened oversight and 
accountability within the Federal military and veterans' educational 
benefits programs.
    I am pleased to report that there has been real progress since 
then, with DOD, ED, VA, DOJ, the Federal Trade Commission, and the 
Bureau working together to better protect and inform servicemembers, 
veterans, and military families about their education benefits. For 
example:

     The term ``GI Bill'' has now been trademarked by the VA;
     DOD has updated their rules to protect against aggressive 
commercial solicitation on military installations by educational 
institutions; and
     ED has finalized the ``Know Before You Owe Financial Aid 
Shopping Sheet,'' enabling veterans to make better-informed decisions 
about paying for college and choosing a school.

    The State Attorneys General have been active, too, filing suit 
against certain colleges for deceptive marketing and aggressive 
recruiting tactics. And 19 of them joined Kentucky Attorney General 
Jack Conway in filing suit against a company called Quin Street that 
had a number of lead-generation Web sites marketing to GI Bill 
recipients. In addition to paying a monetary settlement and changing 
misleading content on their sites, Quin Street agreed as part of the 
settlement to give the URL www.gibill.com to the VA.
    Certainly there is more work to be done, but I believe these and 
subsequent steps will help protect against some of the most egregious 
abuses we've seen in the past. That said, we intend to keep working 
with groups from the above agencies to see that the Order is 
implemented in a way that best serves our military and veterans.
    Another area of concern that has arisen fairly frequently, both on 
my trips and via our complaint system, is that of financial 
institutions failing to provide Servicemembers Civil Relief Act (SCRA) 
protections to those who qualify for them. DOJ has explicit enforcement 
authority under SCRA, so we coordinate frequently with the DOJ Civil 
Rights Division and DOD concerning the SCRA-related components of the 
military complaints that we receive. In fact, my first testimony before 
Congress in this job was in February 2011 before the House Committee on 
Veterans' Affairs and the subject of the hearing was the failure of the 
largest banks to provide SCRA entitlements to their military 
customers--both the interest-rate reduction to six percent and 
foreclosure protection. I also had the opportunity to take part in a 
panel hosted by Senator Rockefeller and Congressman Elijah Cummings 
discussing the impact on military readiness when SCRA protections are 
violated.
    Since then the State AGs, the Department of Housing and Urban 
Development (HUD) and DOJ have aggressively pursued this issue, 
resulting in a national mortgage settlement with the five largest 
mortgage lenders that was in part spurred by the lenders' failure to 
comply with the provisions of the SCRA. While I commend the settlement 
and their continued vigilance, we do continue to see compliance 
concerns in the complaints that military/veteran consumers file with 
the Bureau.
    SCRA compliance problems are not limited to mortgage servicing; 
we've now identified other markets with similar problems. Most notably, 
in the student-loan servicing market, we've heard of lenders giving out 
incorrect or misleading information or even refusing to grant SCRA 
protections. Some examples:

     Servicemembers being told (incorrectly) that they must 
provide a letter from their commanding officer or ``certified'' orders 
in order to receive the interest-rate reduction to six percent;
     Officers being told to provide orders with an end date in 
order to receive the interest-rate reduction (officers' orders usually 
don't have end dates--they are indefinite);
     The lender terminating the interest-rate reduction at the 
end of one year because the servicemember does not provide proof of 
continuing active-duty service (proof that is not required under the 
SCRA);
     The lender placing the servicemember in forbearance 
automatically when SCRA rights are invoked, rather than simply 
providing the requested interest-rate reduction; and
     The lender failing to comply with a servicemember's 
request that the lender refund all the interest charged above 6 percent 
from the point of entry into active-duty military service. As long as 
the servicemember requests this SCRA protection within 180 days of 
leaving active duty, the lender must comply and issue a refund, no 
matter how long has passed since the servicemember entered active duty, 
even if it's been months or years.

    We put out a report on this topic with the Bureau's Student Loan 
Ombudsman, along with an action guide for servicemembers. In the report 
we also raised concerns about an issue that arises when servicemembers 
attempt to replace older, pre-service student loans with a new Direct 
Consolidation Loan (to take advantage of Federal student loan repayment 
options such as Income-Based Repayment or Public Service Loan 
Forgiveness). Unfortunately, the law as currently written does not 
convey the ``pre-service obligation'' status of the old loans to the 
new Direct Loan, which has the unfortunate result of forcing some 
servicemembers to choose between the SCRA protection of a lower 
interest rate on their old loans or the prospect of income-based 
repayment and eventual loan forgiveness with a consolidated Direct 
Loan.
    And although it is not an SCRA issue, while we're on the topic of 
student loans I wanted to raise a concern about veterans with private 
student loan debt who have been very severely injured during combat or 
at any time during their military service. It's a sad fact that some 
veterans with the most severe disabilities will never be capable of 
obtaining or performing a job that will enable them to repay that 
private student loan debt. However, as the law now stands, it is very 
difficult for them to discharge those debts despite the reality of 
their medical condition. It seems a shame that Federal student loans 
have such a provision for those with 100 percent disability, but there 
is currently no such relief for those who have private student loans.
    Another issue that I have heard about frequently on my trips 
throughout the U.S. concerns abuses connected with the veterans' 
benefit known as Aid and Attendance, which I know this group is 
familiar with. I have heard from a number of State Veterans Affairs 
directors, starting with my trip to Montana at the invitation of 
Senator Tester in January 2012, that they are concerned about the 
increasing number of individuals and companies that use Aid and 
Attendance as a hook to sell their services to elderly veterans. I'd 
like to note a recent settlement by the Attorney General of Washington 
with three financial planning companies that were doing just that. 
These companies were offering help with obtaining Aid and Attendance 
but were requiring their customers to sign up for financial services 
first,--and then moving the veterans' assets into irrevocable trusts 
but not fully informing the veterans of the risks of doing so.
    Aid and Attendance offers can take a variety of forms:

     It may be an offer from a lawyer or ``veterans' advisor'' 
to get the Aid and Attendance benefit for you--for a fee. In reality 
claims processing should be free, but in some cases veterans are being 
charged a ``consultation fee'' before the claim paperwork is begun.
     It may be a claim from a paid advisor that they can get 
the benefit for you more quickly than anyone else. But all VA benefits 
claims have to go through the standard VA evaluation process, and no 
one can bypass the system to get your claim approved faster than usual.
     It may involve offering to help you qualify for Aid and 
Attendance, if you have too much money, by taking control of your 
assets and moving them into a trust where you can't access them, as in 
the case in Washington State. This, in turn, may disqualify you for 
other assistance such as Medicaid, and it also means that you can't get 
at your money. In one outrageous example I was told about an advisor 
who locked one veteran's money into an annuity that wouldn't start 
paying out until he was well into his nineties!
     Also, some retirement homes are now using the lure of Aid 
and Attendance to get veterans to move in on the premise that they will 
get Aid and Attendance and it will pay for everything. In cases where 
the claim is denied after the veteran has already spent money to move 
in, this leaves the veteran in the untenable position of being unable 
to afford to remain in the facility.

    We have also seen a flood of advertising in the past year urging 
those with VA home loans to refinance their homes. Veterans on my staff 
and elsewhere at the bureau have received a torrent of these offers in 
the mail. We were concerned enough that the Bureau and the FTC did a 
joint sweep of the mortgage ads which resulted in letters to a number 
of lenders concerning potential violations of the Mortgage Acts and 
Practices--Advertising (MAP) Rule, with the potential for future 
enforcement actions by the Bureau and FTC.
    On a related note, I commend the FTC for its first enforcement 
action under the MAP Rule, announced June 27th, in which Mortgage 
Investors Corporation, a large refinancer of veterans' home loans, must 
pay a $7.5 million penalty for allegedly calling consumers on the 
Federal Trade Commission's National Do Not Call list, failing to remove 
consumers from its company call list upon demand, and misstating the 
terms of available loan products during telemarketing calls.
    One last area of concern is pension advances--offers to pay 
military retirees a lump-sum payout in return for their monthly 
retirement payments. These offers usually amount to pennies on the 
dollar, and may be in violation of the law regarding assignment of 
pension benefits, even though they are disguised as loans. If you go on 
the internet you will find them--often with patriotic-sounding names 
and the American flags on the Web site to match, but with a high cost 
for the retiree who takes them up on the offer.
    The Bureau has an Office of Financial Protection for Older 
Americans and my office is working with them on these issues. They have 
recently reported to Congress on the wide array of ``elder financial 
advisor'' designations that are in use and spotlighted the fact that 
many of them are not based on any sort of academic rigor or significant 
training--but may sound official to elderly consumers.
    To conclude, the Office of Servicemember Affairs is working hard to 
fulfill its mission to work on consumer financial education and 
consumer-protection measures for military personnel and their families, 
and we certainly want to include retirees and veterans in that number. 
We will press on to work with you and the States on existing problems 
and also address new issues as they arise. Our veterans and their 
families have done extraordinary service for our country, and, in 
return, it's an honor for me and my staff to serve them through our 
work at the Office of Servicemember Affairs.

    Thank you for the opportunity to testify before the Committee.
                                 ______
                                 
Response to Posthearing Questions Submitted by Hon. John D. Rockefeller 
               IV to Consumer Financial Protection Bureau
    Question 1. Clearly, we are still recovering from the foreclosure 
crisis and the wrongdoing by the banks and mortgage servicers who 
repeatedly violated the SCRA. I know that unfortunately, some 
servicemembers are still fighting in court with their banks over these 
issues. What major issues are you seeing today in terms of violations 
of the SCRA?
    Response. Senator, I was pleased to take part in the roundtable you 
held on the Servicemembers Civil Relief Act (SCRA) noncompliance issues 
that were so widespread in the mortgage market. As I noted in my 
testimony, while progress has been made and significant enforcement 
actions have been brought by the Department of Justice and the state 
Attorneys General, we do continue to see compliance concerns in the 
complaints that military/veteran consumers submit to the Bureau.
    The SCRA issues I see are not limited to mortgage servicing; the 
Bureau has now identified other markets with similar problems. Most 
notably, in the student-loan servicing market, we've heard of lenders 
giving out incorrect or misleading information or even refusing to 
grant SCRA protections. Last October, my office, in conjunction with 
the Bureau's Office for Students, published a report documenting the 
SCRA concerns we had observed in student loan servicing. And, more 
recently, our Student Loan Ombudsman published a report in which he 
noted: ``While some lenders and servicers have addressed servicing 
problems facing military families since the publication of our previous 
report, not all have done so. The Bureau continues to receive 
complaints from servicemembers having trouble accessing benefits under 
the Servicemembers Civil Relief Act.''
                                 ______
                                 
  Response to Posthearing Questions Submitted by Hon. Mark Begich to 
                  Consumer Financial Protection Bureau
    Question 2. It's our understanding that that DOD and the CFPB have 
been collaborating together on a new financial readiness program to 
include SCRA education. What is the progress of that program, and in 
the meantime, what steps are being taken to educate servicemembers 
about their SCRA protections?
    Response. In 2011, I personally observed the financial education 
given by Department of Defense to servicemembers at the beginning of 
their career: at Basic Training and the Advanced School that follows 
it. I watched financial classes at Naval Station Great Lakes (IL), the 
Army's Fort Jackson (SC) and the Marine Corps Recruit Depot in San 
Diego (CA).
    My conclusion was that Basic Training is not a good place to absorb 
financial content, because recruits are tired and stressed, and even 
prone to fall asleep during the classes. Also, recruits may already be 
in debt before they arrive at Basic Training. Staff at Lackland Air 
Force Base, which conducts Air Force Basic Training, found that 
recruits arriving there in 2008 already had an average of $10,000 in 
debt.
    Those two observations, among others, led the Bureau to plan to 
provide a short financial-education curriculum that can be accessed via 
smartphone or computer during what the military calls the Delayed Entry 
Program (DEP). DEP comprises the period when an individual has 
committed to join the military, but has not yet arrived at boot camp, 
and DEP can range from two weeks to up to a year in length. It's a 
timeframe when a new recruit would have more time and less stress than 
at Basic Training so could focus on some ``just-enough and just-in-
time'' financial lessons that could be very helpful before they get 
that first military paycheck and start thinking of ways to spend it. It 
could also provide useful information about Servicemember Civil Relief 
Act (SCRA) benefits for pre-service debt.
    The Bureau is in the process of designing the modules and technical 
specifications to deliver this curriculum. We have sought and received 
input from the Pentagon, including the Senior Enlisted members of all 
the services, throughout the design process, and they have signaled 
their support for fielding the product when it is ready for an initial 
rollout.
    My office has taken several other steps to help educate about the 
protections of the SCRA. For example, in March 2013 we hosted a virtual 
Military Financial Educator Forum on military student loan repayment 
issues, providing helpful information to military Personal Financial 
Managers, Education Service Officers, and Legal Assistance Attorneys. 
The interactive virtual forum highlighted military student loan 
servicing challenges and loan repayment options available to 
servicemembers, including the SCRA. Forum attendees were also provided 
with resource guides they could use to help their clients with this 
complex issue. Over 250 registered military educators and counselors 
logged in to view the forum from military installations all over the 
world including bases in the US, Japan, Germany, Belgium, Turkey, 
Djibouti and from ships off the coast of West Africa.
                                 ______
                                 
Response to Posthearing Questions Submitted by Hon. Richard Blumenthal 
                to Consumer Financial Protection Bureau
    Question 3. Failure to Include Open-end Credit Products in the DOD 
Definition of Consumer Credit
    In 2007, following the passage of the Military Lending Act, the 
Department of Defense issued a regulation that exempted all forms of 
open-end credit products from the protections of the MLA. Even after 
acknowledging that open-end credit products such as military 
installment loans often have extremely high costs due to excessive fees 
and interest, the Department drafted a very narrow definition of 
consumer credit products.
    Since 2007, many lenders have evolved and developed new practices 
by taking advantage of the Department's narrow definition. A report 
released last year by the Consumer Federation of America found evidence 
of this movement, concluding that ``The trend in internet payday 
lending is toward longer-term `installment' payment terms which places 
these triple-digit rate loans outside the 91-day term definition in the 
DOD rules.'' Another very popular form of high-cost loan used by 
servicemembers is a Deposit Advance product, which is a form of payday 
loan offered by a bank to an existing customer. Despite the fact that 
these type of open-end credit products are some of the most widely used 
among veterans, they are currently excluded from regulation under the 
Military Lending Act.
    Ms. Petraeus, can you elaborate on how prevalent these open-end 
credit products are among military borrowers? If we do not close the 
loopholes in current regulation, do you expect lenders will continue 
offering closed-end credit products to servicemembers?
    Response. I hear from financial counselors and Judge Advocate 
Generals (JAG) on the installations about the prevalence of payday-like 
products that are specifically marketed to military families--often 
with patriotic-sounding names and American flags on the Web site to 
match, but with a sky-high interest rate for the servicemember who 
takes out the loan. Although the Military Lending Act of 2007 
(``Military Lending Act'' or ``MLA'') put a 36 percent cap on the 
permissible interest rate of certain types of loans to the active-duty 
military, some lenders have found ways to get outside of the 
definitions in the Department of Defense (DOD) rule implementing the 
Military Lending Act.
    For example, I know of one military-specific lender that offers 
loans with an annual percentage rate (APR) of over 500 percent, but 
structures its product as open-end credit so is not covered by the MLA. 
And unfortunately they aren't the only one. The internet is full of 
``military loans,'' some outright scams and others with very high 
interest rates.
    While at Travis Air Force Base, CA, I also heard from a Personal 
Financial Manager whose airmen clients had taken out deposit advance 
products with triple-digit interest rates. The counselor and the base 
JAG were dismayed to find out that the MLA consumer protections did not 
apply because these products were structured as open-end credit.
    However, structuring a product as open-end credit is not the only 
way to evade the protections of the MLA. A lender can also make their 
product longer than 91 days, make it greater than $2000, or even simply 
not require the borrower to provide a paycheck or Automated Clearing 
House (ACH) authorization as a payment mechanism. I have seen examples 
of all of these types of products marketed directly to servicemembers 
and their families. So yes, I am worried that we are seeing a shift 
away from products that are covered by the MLA to non-covered products 
and I fear that unless the regulations are updated the MLA will no 
longer provide the necessary consumer protections for military 
families.

    Question 4. The Current Definition Undermines the Private Right of 
Action
    The Military Lending Act of 2007 was a landmark piece of 
legislation that provided much needed financial protections for the men 
and women who serve our country. However, these protections are only 
effective if servicemembers have the ability to hold predatory lenders 
accountable when they break the law. Last year, I introduced 
legislation to establish a private right of action for veterans who 
have fallen victim to abusive lending practices. I was proud to see 
this legislation adopted and passed as an amendment to the National 
Defense Authorization Act of 2013.
    However, even with the addition of this enforcement mechanism, the 
Military Lending Act is only effective if it is implemented through 
strong regulation. Unfortunately, the current Department of Defense 
regulations include a very narrow definition of consumer credit that 
exempts open-end credit products. The loophole created by this narrow 
definition allows lenders to offer high-cost, open-end credit products 
with annual percentage rates of 300 percent or more.
    Though servicemembers are able to take action against lenders who 
have offered them credit products covered by current regulation, 
lenders are offering open-end credit products that are exempt from 
regulation with increasing frequency. We must revisit and strengthen 
these regulations to ensure that servicemembers and veterans are 
protected against the credit products that they use most.
    Ms. Petraeus, can you talk about how the current exemption for 
open-end credit products undermines the ability of servicemembers to 
hold predatory lenders accountable?
    Response. When the Military Lending Act of 2007 (``Military Lending 
Act'' or ``MLA'') protections are applied only to a narrow band of 
credit products, there is less opportunity for regulators and 
enforcement agencies to protect military consumers from high-cost, 
high-risk loans. As you know well, an enforcement or private right of 
action can only take place if the credit product falls within the 
definition of consumer credit as defined by the Department of Defense 
in the MLA regulations. For example, even if a servicemember or their 
spouse takes out a payday loan with an APR in excess of 36 percent, 
agencies with administrative enforcement authority under the law are 
unable to enforce the protections of the MLA if that loan is greater 
than 91 days, over $2000, or structured as open-end credit. So it is 
very important that the Department of Defense is reexamining the 
regulation and the current definition of ``consumer credit.''
                                 ______
                                 
  Response to Posthearing Questions Submitted by Hon. Mazie Hirono to 
                  Consumer Financial Protection Bureau
    Question 5. Your testimony describes the practices of some colleges 
who aggressively recruit servicemembers just for their GI Bill 
benefits. Veterans can be targeted to sign up, even if they aren't 
qualified for the courses. As one possible cause, your testimony points 
to a loophole in the ``90-10'' rule, in which GI Bill benefits aren't 
considered education benefits subject to the 90% limit on some 
colleges' Federal funds. Do you support legislation to close this 
loophole and put GI Bill Benefits on the same footing as U.S. 
Department of Education (ED) benefits in the 90-10 rule?
    Response. The overall cost to the government of the GI Bill and 
Tuition Assistance (TA) has soared since passage of the 90-10 rule. 
According to Department of Veterans Affairs (VA) records, while the 
number of individuals using VA education benefits has roughly doubled 
since 1998--from less than 500,000 recipients to nearly 1 million--the 
monetary cost has grown ten-fold, rising from less than one billion to 
nearly ten and a half billion dollars per year. And the cost of TA has 
also grown exponentially, on what I have heard described as an 
unsustainable upward trajectory, with for-profit colleges taking an 
increasing share of those TA dollars. In 2011, for-profit colleges 
collected one of every two TA dollars, totaling $280 million of the 
$563 million disbursed during the year. This is an 8 percent increase 
over 2009, when for-profit schools collected 42 percent of the $515 
million in TA funds disbursed. It seems prudent for policymakers to 
examine whether the 90-10 rule in its current form is a sensible 
framework, given the significant increase in the number of 
servicemembers, veterans, and military spouses receiving education 
benefits.

    Question 6. What other specific legislation should Congress pass to 
better protect taxpayers, veterans, and their families in the use of 
Federal GI Bill benefits?
    Response. As an independent regulatory agency, the Bureau is 
focused on carrying out, implementing, and enforcing the laws that 
Congress and the President enact. We would be happy to meet with you or 
your staff to discuss Federal GI Bill benefits and our concerns with 
protecting taxpayers, veterans, and their families.
    The Bureau has been working in concert with the VA, Department of 
Defense, Department of Education, and the Department of Justice to 
implement Executive Order 13607, ``Establishing Principles of 
Excellence for Educational Institutions Serving Servicemembers, 
Veterans, Spouses, and Other Family Members'' and the Comprehensive 
Veterans Education Information Policy law (PL 112-249).

    Chairman Sanders. You finished on military precision with 5 
seconds to go. Thank you.
    Colonel Kantwill.

 STATEMENT OF COLONEL PAUL KANTWILL, DIRECTOR OF LEGAL POLICY, 
OFFICE OF THE UNDERSECRETARY FOR PERSONNEL AND READINESS, U.S. 
                     DEPARTMENT OF DEFENSE

    Colonel Kantwill. Good morning, Mr. Chairman, Senator 
Boozman, and Members of the Committee. It is an honor to appear 
before you and represent the Department of Defense and all of 
our great men and women. On behalf of the Department, I thank 
you for your assistance and support in protecting our 
servicemembers and their families in the consumer financial 
marketplace, and for the opportunity to address you today 
regarding financial issues affecting them.
    I will discuss first the SCRA. I will then discuss other 
financial challenges confronting servicemembers and their 
families in today's marketplace, focusing on issues and 
challenges that fall within or around the Military Lending Act, 
or MLA, as the Department sees this as the biggest current 
financial challenge facing our force.
    The Department recognizes and appreciates fully the 
critical importance of the SCRA. No other statute provides the 
breadth of benefits and protections for servicemembers that the 
SCRA does, and over its long history of more than 70 years it 
has lessened some of the very many burdens associated with 
military service.
    Congress has continued to play the most critical role in 
protecting our servicemembers and their families, strengthening 
the Act and its protections in many ways, especially in recent 
years. It is with pride, therefore, that we assert that the 
current status of the SCRA education compliance and enforcement 
is largely a good news story. We have all read accounts of 
mortgage foreclosure abuses and we know well the ravages that 
the economic crisis and the burdens of more than 12 years of 
deployments have had upon the financial fitness of military 
families.
    As these relate to the SCRA, however, we believe we have 
been very effective in curbing foreclosure abuses against 
military personnel and their families. This is the result of 
much sustained and very hard work within the Department and 
with other Governmental agencies and the financial industry.
    The Department is fortunate to enjoy a tremendous 
relationship with other Federal agencies relating to consumer 
law issues, the Department of Justice and CFPB and the OCC, to 
name just a few. Federal enforcement actions brought by our 
colleagues at Justice have been swift and effective. We are 
pleased to have the CFPB always at our side. State and local 
compliance and enforcement efforts are critical.
    There may still be foreclosures out there. We may not be 
yet out of the economic woods, and we are looking closely at 
some issues like the reduction of interest rates on student 
loans under the SCRA, but we are largely encouraged by good 
progress on the SCRA front.
    Despite the successes that we can cite on the SCRA, we have 
concerns regarding small dollar lending and related products 
and services. Since significant departmental, interagency, and 
Congressional action resulted in the Military Lending Act more 
than 7 years ago, we have stamped out the majority of abuses in 
the areas regulated.
    Several years removed from its enactment, however, many 
parties from servicemembers to State Attorneys Generals express 
concerns that the industry, including some unscrupulous 
lenders, have sought and are seeking to create products and 
services which fall outside the MLA.
    This has not escaped our or Congress's attention that at 
your direction the Department is studying changes in the credit 
marketplace and their effects on servicemembers and their 
families. The Department's advance notice of proposed 
rulemaking was published in June 2013.
    While many groups apprise us that our concerns are well-
advised, the Department is undertaking its own extensive 
surveys to gather even more information. A survey of DOD legal 
assistance personnel around the world closes out tomorrow. A 
similar survey has been distributed to DOD financial 
counselors. Last, a larger survey is being sent to our 
servicemembers, the boots on the ground, if you will.
    The Department has assembled the Prudential Regulators and 
the CFPB to explore potential revisions to the regulation. We 
have assembled a team of skilled economists, analysts, and 
drafters to assist us in this initial rulemaking. We will 
analyze our responses to the Federal Register notice in order 
to obtain a broad basis of feedback from consumer advocates, 
the financial industries, Federal and State regulators, and 
engaged citizens in order to determine the potential benefits, 
pitfalls, and consequences of extending the definitions of the 
regulation to cover additional forms of credit.
    We remain committed to balancing regulation with education 
and assistance to maintain financial readiness, and the 
Department plans to maintain a steady approach to implementing 
the regulation to balance the protections offered through the 
regulation, while sustaining access to helpful, financial 
products.
    In response to these challenges and in support of our 
servicemembers and their families, the Department remains 
proactive and vigilant, employing multifaceted education and 
training programs and leveraging all available resources. On 
behalf of the Department, I thank you for your assistance and 
support. It is my privilege to appear before you and I look 
forward to your questions.
    [The prepared statement of Colonel Kantwill follows:]
Prepared Statement of Colonel Paul Kantwill, Director, Office of Legal 
     Policy, Office of the Under Secretary of Defense (Personnel & 
                 Readiness), U.S. Department of Defense
    Good Morning, Chairman Sanders, Ranking Member Burr, and Members of 
the Committee. It is an honor to appear before you and represent the 
Department of Defense and all of our great men and women in uniform. On 
behalf of the Department, I thank you for your assistance and support 
in protecting our Servicemembers and their families in the consumer 
financial marketplace. It is a pleasure to testify before you regarding 
the consumer financial issues we see affecting Servicemembers, 
Veterans, and their families and the Department's response to these 
issues and challenges.
    I should first like to provide a bit of background on the current 
state of the Department's involvement in consumer law issues and 
financial readiness. I will then turn my focus to the Servicemember's 
Civil Relief Act (SCRA), with specific focus on the Department's 
efforts to support compliance and enforcement thereof. Third, I will 
discuss other financial challenges confronting Servicemembers, 
veterans, and their families in today's consumer marketplace. These 
challenges are many and varied, but I will focus primarily on issues 
and challenges that fall within or around the Military Lending Act 
(MLA)--small dollar, payday-type lending services and products--as the 
Department sees this as the biggest, current financial challenge facing 
our Servicemembers, Veterans, and their families. I will conclude with 
some very specific observations on where the Department sees the 
consumer credit industry going and the actions currently underway in 
very specific response to these developments.
           department of defense financial readiness programs
    The financial readiness of Servicemembers and their families is 
essential to their well-being and their ability to contribute to the 
mission. Over the course of my career as a Judge Advocate, I have 
assisted Servicemembers and their families in deployed and garrison 
environments, and know well that a Servicemember distracted from the 
tactical mission by financial issues cannot be completely mission-
focused. Thus, the Department has, for over a decade, created, refined, 
and enhanced financial readiness programs predicated on Servicemembers 
and their families receiving reasonable protections, acquiring at least 
a basic understanding of finances, and receiving access to helpful 
financial products and services.
    Since the term ``Financial Readiness'' was first coined in 2003, 
the Department has continually improved and expanded its financial 
readiness campaign to increase Servicemember awareness of saving and 
financial stability, and enhance understanding of financial products 
and services. Utilizing a combination of education, resources, 
programs, and protections (such as the SCRA and the MLA), the 
campaign's goal is to reduce the financial stress on military families, 
thereby enhancing overall mission readiness.
    The Financial Readiness Campaign involves eight pillars of 
financial readiness:

    1. Maintaining good credit
    2. Achieving financial stability
    3. Establishing routine savings
    4. Participation in the Thrift Savings Plan and Savings Deposit 
Program
    5. Retention of the Servicemember's Group Life Insurance and other 
insurance
    6. Utilization of low-cost loan products as an alternative to 
payday lending and predatory loans
    7. Use of low-cost Morale, Welfare and Recreation programs such as 
the Commissary and PX
    8. Preservation of Security Clearances

    The campaign has been effective and is on-going. Servicemember 
participation in the Thrift Savings Program, for example, is at an all-
time high. The Savings Deposit Program, available to all deployed 
Servicemembers, enjoys similarly historic high participation rates. The 
campaign is augmented by nonprofit organizations that produce programs 
and campaigns such as ``SaveandInvest.org'' and ``Military Saves.'' The 
recent ``Military Saves'' campaign was the largest and best ever.
    An essential element of our Personal Financial Readiness Program is 
proactive life cycle financial management services. The program 
addresses the effects of financial decisions on personal and 
professional lives, provides resources needed to make prudent consumer 
decisions, and offers related services and support.
    A variety of resources are available to help Servicemembers and 
their families avoid the consequences of poor financial decisions, and 
to put them on the path to financial freedom. Education, counseling, 
and training are available both on-line and in-person to military 
members and families of all components. The Department has Personal 
Finance Managers (PFMs) at every military installation who provide 
financial counseling, education, training, and services. All of these 
PFMs hold a nationally recognized financial counselor certification.
    As part of the DOD Military Family Life Consultants (MFLC) program, 
the Department has additional resources in the form of Personal 
Financial Counselors (PFCs) who augment other resources and provide 
``surge'' capability to units or installations at critical times or 
with critical needs.
    Other excellent resources, such as Military OneSource (MOS) are 
available 24 hours per day for all Servicemembers and their families. 
MOS offers free and confidential financial consultations over the phone 
or face-to-face, in addition to providing specialized financial and tax 
planning consultations. The ``Money'' section of MilitaryOneSource.com 
provides financial information and resources that include calculators, 
tips, books and CDs, and personal finance newsletters.
    The Department has also partnered with nationally-recognized, 
financial literacy non-profit organizations. Groups like the Consumer 
Federation of America (CFA), the Better Business Bureau Military Line, 
and the Financial Industry Regulatory Authority (FINRA) Education 
Foundation provide tremendous resources free of charge. The Department 
and CFA conduct the tremendously-successful Military Saves Campaign 
every year. DOD also partners with the Department of the Treasury and 
the Federal Trade Commission (FTC)--just two of more than twenty such 
organizations with whom we work in Treasury's Financial Literacy and 
Education Commission) to address consumer awareness, identity theft, 
and insurance scams to Servicemembers and families.
                  the servicemember's civil relief act
    The Department recognizes and appreciates the critical importance 
of the SCRA. It is clear that no other statute provides such a unique 
breadth of benefits and protections for Servicemembers. The purpose of 
the SCRA is a lofty one, to provide Servicemembers' peace of mind, 
knowing that their personal affairs and economic interests will be 
protected while they put their lives on the line in defense of our 
Nation, and the Act has lived up to that goal.
    The Act's protections are broad and diverse. It protects 
Servicemembers from evictions, default judgments, and foreclosure. It 
allows them to delay judicial proceedings and to place caps on their 
interest rates. It also provides them and their spouses certain tax 
relief. Over its long history of more than 70 years, it has lessened 
some of the many burdens associated with military service.
      congressional efforts to strengthen enforcement of the scra
    Congress has continued to play a most critical role in protecting 
our Servicemembers and their families. Over the last few years Congress 
has strengthened the SCRA's protections through such measures as the 
Veterans' Benefit Act of 2010, which provided for additional civil 
enforcement, as well as monetary damages and attorneys' fees. It also 
clarified that the Attorney General has similar enforcement authority 
on behalf of Servicemembers and other aggrieved persons.
    Congress has extended the 6% interest rate cap for pre-service 
mortgage obligations. This interest rate cap, which had been in effect 
for decades, had previously applied only to actual periods of active 
duty. Now the interest rate cap for pre-service mortgage obligations 
has been extended for an additional 12 months after leaving active 
duty. Congress also amended the SCRA to extend protections from 
foreclosure on pre-service mortgage obligations for twelve months after 
the Servicemember leaves active duty. Under these conditions and during 
this time, no Servicemember cannot be foreclosed upon absent a court 
order.
SCRA Education and Enforcement
    Congressional support through the SCRA and other measures, however, 
means little if our Servicemembers are not aware of their rights. Thus, 
the Department has developed programs to ensure that Servicemembers 
know about the benefits and protections of the SCRA. This educational 
process involves coordinated and overlapping efforts to alert the 
Servicemembers and their commanders of these benefits and protections 
and then to ensure that the proper counselors are there to help the 
Servicemember fully understand the nuances of the relevant laws and 
receive their full protections under the law.
    The Department's efforts to educate servicemembers and their 
families center around installation readiness facilities, pre-
deployment and re-deployment process facilities, and reserve component 
mobilization and demobilization processing centers. These reserve 
component processing centers have been of critical importance because 
two of the most important economic protections and benefits--the 6% 
interest rate cap and the extension of foreclosure protections--apply 
only to pre-service obligations and thus effect predominately 
Reservists and National Guardsmen called to active duty. As a result, 
SCRA and related financial training at pre-deployment and re-deployment 
processing facilities is more detailed and helpful than ever before.
    Thus, it is with pride we assert that SCRA education, compliance, 
and enforcement is a ``good news story.'' Certainly there have been 
accounts of mortgage foreclosure abuses and other prominent SCRA 
violations. We know well, the ravages the economic crisis and burdens 
of more than 12 years of sustained conflict with related deployments 
have had upon the financial fitness of military families.
    As it relates particularly to the SCRA, however, we have been 
effective in curbing foreclosure abuses against military personnel and 
their families. While there may still be some foreclosures in process 
or in the ``pipeline,'' it appears that the majority of the abuses seen 
in the past have been curbed. This is the result of sustained and hard 
work within the Department, with other government agencies, as well as 
with the financial industry.
    The Department is fortunate to enjoy--as you can see from our 
collective presence here today--a very cooperative working relationship 
with other Federal agencies relating to consumer law issues--the 
Department of Justice, the CFPB, the CFPB's Office of Servicemember's 
Affairs (OSA), and the Office of the Comptroller of the Currency (OCC), 
to name just a few. Federal enforcement actions brought by our 
colleagues at Justice have been swift and effective. State and local 
compliance and enforcement efforts are critical. We are grateful for 
our cooperative working relationships with consumer advocates and other 
organizations such as the Consumer Federation of America (CFA) and the 
HOPE NOW Alliance, dedicated to assisting all persons with their 
financial needs--but who are also tremendously dedicated to our 
military families.
    We have been and remain engaged with the consumer financial 
industry. If we are to represent and protect our Servicemembers and 
their families--and we will--it is essential to have open lines of 
communication with the industry. We are proud of our cooperation with 
the American Bankers Association, the Association of Military Bankers 
of America, the Credit Union National Association, and the Defense 
Credit Union Council, in efforts to keep them apprised on the SCRA and 
the MLA, and advise them of issues affecting our Force. Our close 
working relationship with the Financial Services Roundtable (FSR) and 
the Housing Policy Council (HPC) has allowed us to advocate frequently 
and effectively on financial issues affecting the Force. The industry 
remains supportive and complementary of the Department's enhancements 
to the Defense Manpower Data Center's database capabilities, providing 
industry with real-time, public-access, large batch data search 
capabilities and allowing industry to identify military customers and 
provide them SCRA and other benefits to which they are entitled. Other 
initiatives include forms, accepted by the financial industry, that 
allow Servicemembers to invoke their SCRA protections more easily. Our 
work with industry and other agencies has already produced great 
developments regarding protections and benefits for military families 
disadvantaged by Permanent Change of Station (PCS) moves.
    In conclusion, while there may be more foreclosures on the horizon, 
and we are not yet out of the ``economic woods,'' we are very 
encouraged by solid progress on the SCRA front.
       the military lending act and related financial challenges
    Despite the aforementioned successes on the SCRA front, we have 
commensurate concerns regarding small dollar lending and related 
products and services. Seven years ago, the Department recognized there 
were some specific lending practices causing problems for 
Servicemembers and their families, which could not be adequately 
addressed through education programs and awareness campaigns. 
Significant Departmental and Inter-Agency action resulted in our Report 
on Predatory Lending Practices Directed at Members of the Armed Forces 
and Their Dependents (2006), and subsequent Congressional action in the 
form of the Talent Amendment, commonly referred to as the Military 
Lending Act (MLA) (Sec 670 of the John Warner National Defense 
Authorization Act for FY 2007). The MLA gave the Department authority 
to write a regulation to define ``credit'' subject to the limitations 
posed by the MLA.
    With the assistance of the Prudential Regulatory Agencies we did 
just that, and the resulting rule (32 CFR Part 232) covered and tax 
refund anticipation loans and closed-end payday loans and vehicle title 
loans--both of which are tightly defined,. This good work stamped out 
the majority of abuses in the areas regulated, and we have relied upon 
the enforcement efforts of Federal and state regulators to great 
effect.
    The Department has remained vigilant in this area. Annually, we 
send a representative to the National Conference of Consumer Credit 
Administrators to ensure uniformity in compliance by covered creditors. 
Each year the regulators have reported that their examinations have 
found compliance with the Rule and no need for enforcement action. In 
some states where such loans are authorized, but in which enforcement 
authority has not been provided to, the Department has engaged the 
States, requesting they make technical amendments to their statutes 
allowing for administrative enforcement. To date, 37 States either do 
not authorize these loans or provide their regulators with adequate 
administrative enforcement authority.
    The Department has also been working with the FTC and the CFPB to 
assist in recording violations of the SCRA and the MLA in the FTC's law 
enforcement database--Military Sentinel. DOD legal assistance attorneys 
and financial counselors assist military clients with recording 
instances of fraud, deception, abusive practices, and identity theft 
into the database so U.S. Attorneys, State Attorneys General, Federal 
and state regulators, and other law enforcement agencies have access to 
allegations.
    Our Servicemembers, families, Veterans, legal assistance attorneys, 
and financial counselors have informed us that the MLA legislation has 
been extremely effective in stamping out abuses involving the types of 
credit covered. In addition, Relief Societies, military banks, and 
credit unions have assisted Servicemembers and families in need. 
Despite this success, unscrupulous lenders have sought, and are 
seeking, to create products and services which fall outside of the MLA 
and the enforcement actions mentioned above.
    Several years removed from its enactment, however, our financial 
counselors and legal assistance attorneys still see clients who have 
payday or vehicle title loans. They also report that internet and 
overseas opportunities exist to evade the law, and that some 
unscrupulous lenders--and even borrowers--still attempt to skirt or 
evade the law, by entering into loans that charge interest greater than 
36 percent and contain terms that have been modified to avoid falling 
under the MLA. Creditors and lenders still attempt to avoid the MLA by 
utilizing procedures or modifying products to fall outside of the 
regulation.
    Lending over the internet remains an issue, with the most egregious 
offenders located off-shore or outside the U.S. to avoid coverage under 
the Act. The use of allotments in consumer credit transactions and the 
abuse of installments loans are of concern to the Department.
                        the department's efforts
    This has not escaped our--or Congress'--attention, and at the 
direction of the Congress, the Department is studying changes in the 
credit marketplace and their effects on Servicemembers and their 
families. The first notice of this study was posted in the Federal 
Register on June 13, 2013, and we expect to receive comments by 
August 1, 2013.
    While our close cooperation with Governmental entities, non-profit 
organizations, and consumer watchdog groups--as well as our own 
efforts--have apprised us that our collective concerns are well-placed, 
the Department is undertaking its own extensive, internal surveys to 
gather even more information. A survey of DOD Legal Assistance 
Personnel has been sent to legal offices across the globe. The intent 
of the survey is to learn from practitioners, with hands-on experience 
assisting clients in consumer law matters, which financial products and 
issues are most prevalent in the force today, and we are currently 
receiving responses. A similar survey is being distributed to DOD 
financial counselors. Last, a larger-scale survey has been sent to 
servicemembers, the ``boots-on-the-ground.''
    As a result of what we have learned thus far, the Department has 
assembled the Prudential Regulatory Agencies and the CFPB to explore 
revisions to the regulation. We have established a team of skilled 
economists and analysts to assist us in this initial rulemaking, in 
addition to a similarly-skilled team of drafters. From all of these 
sources, and with all of this assistance, we will determine the best 
course our proposed rulemaking should take.
    As our investigation progresses, and in response to these 
challenges and in support of our Servicemembers and their families, the 
Department remains proactive and vigilant; employing multi-faceted 
education and training programs, and leveraging all available 
resources, including extensive cooperation with all of the Agencies and 
partners described above.
    The Services Legal Assistance Programs have continued to provide 
expert legal assistance in all consumer law areas. These services, 
focused where needed at the installation level, are available to assist 
in a large number of Consumer Law related areas. These include services 
in all the areas noted above, to include the burgeoning areas of 
suspect auto loans/purchase practices, deployment-related SCRA 
violations, and aggressive debt collection practices.
    The Services continue to designate Consumer Law matters in their 
highest tiers of available services and provide specialized training is 
provided to all practitioners. The Department's long-term association 
with the Legal Assistance for Military Practitioners (LAMP) Committee 
of the American Bar Association (ABA) and its Pro Bono Project (PBP), 
enables the Services' Legal Assistance organizations to refer eligible 
clients to the PBP, where they receive both in- and out-of court-
representation from local volunteer attorneys who are subject matter 
experts in Consumer Law. The PBP has been so successful that the ABA 
has pushed the concept to state and local bar associations, who are now 
offering very similar programs in conjunction with their local military 
installations.
                             the way ahead
    Current efforts of the Department, other Government agencies, and 
non-profit organizations are important. But even more important are 
future efforts to protect and advocate for our Servicemembers, the way 
ahead on consumer law issues affecting the force, and how we work to 
meet those challenges.
    The Department is reviewing all available evidence and data, and 
pending the results of the surveys described above, we will review 
options for appropriate action with our partners. We will carefully 
analyze responses to our Federal Register notice in order to obtain a 
broad basis of feedback from consumer advocates, the financial 
industry, Federal and state regulators, and engaged citizens in order 
to determine the potential benefits, pitfalls, and unintended 
consequences of extending the definitions in the regulation to cover 
additional forms of payday, vehicle title, and tax refund anticipation 
loans, as well as other forms of financial products not covered by the 
regulation currently. We remain committed to balancing regulation with 
education and assistance to maintain the financial readiness of the 
force. The MLA and implementing regulation have done what was intended 
over the past six years, and the Department plans to maintain a steady 
approach to the implementing regulation to balance the protections 
offered through the regulation while sustaining unimpeded access to 
helpful financial products.

    On behalf of the Department, I thank you for your assistance and 
support. It is my privilege to appear before you and I look forward to 
your questions.
                                 ______
                                 
  Response to Posthearing Questions Submitted by Hon. Mark Begich to 
                     the U.S. Department of Defense
    Question 1. Can you outline for us progress made to date on 
improving DMDC and what future plans DOD has to improve the SCRA 
processing component of DMDC?
    Response. DMDC has continuously improved the SCRA application and 
Web site since its inception, balancing the concerns of industry, 
Consumer Financial Protection Bureau requirements, and individual 
privacy interests. Below is the timeline of DMDC's efforts to respond 
to SCRA inquiries:

    Prior to 2002--DMDC responded to inquiries on SCRA eligibility 
manually. The inquiries were received through the mail or over the 
telephone.
    In 2002--DMDC developed and launched the SCRA Website. All users 
had to establish accounts. The Web site only provided responses on 
those members currently serving on active duty.
    April 2005--DMDC converted SCRA Website to a public site.
    August 2009--DMDC expanded the Web site to answer the question 
``has this individual served on active duty in the last 367 days.'' 
This was done to address changes in the law that extended protections 
beyond their actual dates of service.
    January 2010--DMDC added CAPTCHA (Completely Automated Public 
Turing test to tell Computers and Humans Apart) to the site to prevent 
``screen scraping'' This added an additional level of security to 
prevent computer-generated requests intended to capture large amounts 
of data for commercial re-sale. After many complaints, in April 2011 
CAPTCHA was removed.
    Late 2011--DMDC added the ability to query historic periods of 
active duty back to 1985. In addition, outside the Web site, DMDC 
provided extensive support to institutional customers being audited by 
the DoJ and Treasury.
    April 2012--DMDC made several enhancements to the Web site. The 
manual process above was made available through the Multiple Record 
Request option. The match criteria for an individual were updated to 
include not only Social Security Number (SSN) and last name but also to 
match on last name and date of birth. This change was necessary because 
not all users have ready access to or can ask for SSN.
    February 2013--SCRA 3.0 (the most current version) was released. 
This version was well received by the financial industry. DMDC 
consolidated the single and multiple requests into a single code base. 
It also tightened the rules for matching on last name from the first 
three characters only to the complete submitted last name. The final 
change was the addition of a news display that DMDC uses for informing 
users of any upcoming changes to the site or issues the site may be 
having.

    As new technology becomes available, DMDC will continue to improve 
the SCRA Web site and ensure that changes do not compromise the privacy 
of the individual or the security of the DMDC infrastructure.

    Question 2. To DOD and CFPB-It's our understanding that that DOD 
and the CFPB have been collaborating together on a new financial 
readiness program to include SCRA education. What is the progress of 
that program, and in the meantime, what steps are being taken to 
educate servicemembers about their SCRA protections?
    Response. The Department has developed many and varied programs to 
ensure that Servicemembers know about the benefits and protections of 
the SCRA. This educational process involves coordinated and overlapping 
efforts to alert the Servicemembers and their commanders of these 
benefits and protections and then to ensure that the proper counselors 
are there to help the Servicemember fully understand the nuances of the 
relevant laws and receive their full protections under the law. The 
Department's efforts to educate servicemembers and their families 
center around installation readiness facilities, pre-deployment and re-
deployment process facilities, and reserve component mobilization and 
demobilization processing centers. These reserve component processing 
centers have been of critical importance because two of the most 
important economic protections and benefits-the 6% interest rate cap 
and the extension of foreclosure protections-apply only to pre-service 
obligations and thus effect predominately Reservists and National 
Guardsmen called to active duty. As a result, SCRA and related 
financial training at pre-deployment and re-deployment processing 
facilities is more detailed and helpful than ever before.
    The CFPB has played, and will play, an important role in education 
and enforcement. The CFPB's Office of Servicemember Affairs works with 
DOD to educate and empower Servicemembers and their families to make 
better (OSA) informed consumer decisions, to monitor military 
complaints to the Bureau and the responses to those complaints, and to 
coordinate with Federal and state agencies on consumer protection 
measures for the military. For example, the OSA worked with DOD to 
create the financial module for the DOD Transition Assistance Program, 
or TAP.
    DOD and CFPB will continue to work together to ensure that 
regulations and policies that provide legal protections for consumers 
do not unintentionally hamper Servicemembers and military families from 
accessing those legal protections and to ensure Servicemembers have a 
thorough knowledge of current law. While there is no ``silver bullet'' 
product or one-size-fits all solution for the consumer financial needs 
of and protections for the military community, DOD and CFPB employ a 
multi-faceted approach consisting of career-spanning financial 
education and coaching; military-friendly financial products from 
financial-services providers; enhanced consumer financial tools and 
targeted regulatory protection guidelines; all of which can go a long 
way toward addressing and mitigating the consumer financial challenges 
of the military community.
                                 ______
                                 
Response to Posthearing Questions Submitted by Hon. Richard Blumenthal 
                   to the U.S. Department of Defense
    Question 3. Failure to Include Open-end Credit Products in the DOD 
Definition of Consumer Credit
    In 2007, following the passage of the Military Lending Act, the 
Department of Defense issued a regulation that exempted all forms of 
open-end credit products from the protections of the MLA. Even after 
acknowledging that open-end credit products such as military 
installment loans often have extremely high costs due to excessive fees 
and interest, the Department drafted a very narrow definition of 
consumer credit products.
    Since 2007, many lenders have evolved and developed new practices 
by taking advantage of the Department's narrow definition. A report 
released last year by the Consumer Federation of America found evidence 
of this movement, concluding that ``The trend in internet payday 
lending is toward longer-term `installment' payment terms which places 
these triple-digit rate loans outside the 91-day term definition in the 
DOD rules.'' Another very popular form of high-cost loan used by 
servicemembers is a Deposit Advance product, which is a form of payday 
loan offered by a bank to an existing customer. Despite the fact that 
these type of open-end credit products are some of the most widely used 
among veterans, they are currently excluded from regulation under the 
Military Lending Act.
    Colonel Kantwill, will the Department's review of its Military 
Lending Act regulations include an effort to make sure that veterans 
are protected from high costs on the open-end credit products they use 
most frequently, such as installment loans and Deposit Advance 
products?
    Response. The Department of Defense recognizes that the regulation 
is overdue for revision. We requested the assistance of the Prudential 
Regulators and the Consumer Financial Protection Bureau in February of 
this year to prepare for the review requested in the Conference Report 
accompanying the National Defense Authorization Act for Fiscal Year 
2013. As a result of their consultation, we are conducting preliminary 
rulemaking while accomplishing the review intended by the Report. We 
requested public input that would assist informing our report, and used 
it also as a way of letting the public know of our intent to propose a 
revision to the existing regulation. We received 34 responses to our 
Advanced Notice of Proposed Rulemaking. These responses recognize the 
importance of the Military Lending Act and its successful impact on 
curbing the availability of high cost-short term loans. The majority of 
the responses also recommend that DOD expand the definitions in the 
rule. We anticipate using these inputs to assist in developing a 
proposed rule by the end of the calendar year.

    Question 4. The Current Definition Undermines the Private Right of 
Action
    The Military Lending Act of 2007 was a landmark piece of 
legislation that provided much needed financial protections for the men 
and women who serve our country. However, these protections are only 
effective if servicemembers have the ability to hold predatory lenders 
accountable when they break the law. Last year, I introduced 
legislation to establish a private right of action for veterans who 
have fallen victim to abusive lending practices. I was proud to see 
this legislation adopted and passed as an amendment to the National 
Defense Authorization Act of 2013.
    However, even with the addition of this enforcement mechanism, the 
Military Lending Act is only effective if it is implemented through 
strong regulation. Unfortunately, the current Department of Defense 
regulations include a very narrow definition of consumer credit that 
exempts open-end credit products. The loophole created by this narrow 
definition allows lenders to offer high-cost, open-end credit products 
with annual percentage rates of 300 percent or more.
    Though servicemembers are able to take action against lenders who 
have offered them credit products covered by current regulation, 
lenders are offering open-end credit products that are exempt from 
regulation with increasing frequency. We must revisit and strengthen 
these regulations to ensure that servicemembers and veterans are 
protected against the credit products that they use most.
    Colonel Kantwill, does the Department make any effort to educate 
servicemembers of their right to take action against predatory lenders? 
How frequently have veterans used the private right of action since its 
establishment? Do you think that the Department can take steps to 
ensure that the private right of action is used more frequently?
    Response. The establishing a Servicemember's private right of 
action provides a meaningful enforcement capability that can hold 
creditors accountable to the borrower for their credit practices. We 
believe that the private right of action, along with added enforcement 
by the Consumer Financial Protection Bureau (CFPB), enhances current 
enforcement by state regulators to assure covered creditors will 
comply. We also understand that the current definitions of credit in 
the regulation are no longer adequate to cover the products that are 
potentially causing concern, so the Department is working with the 
Prudential Regulators and the CFPB to revise the regulation.
    The Department is also fully engaged in educating Servicemembers 
concerning their rights as consumers, so that they are familiar with 
their rights under Federal consumer law, Servicemembers Civil Relief 
Act (SCRA), and the Military Lending Act (MLA). Indeed, as I indicated 
in my oral and written testimony, The Department's efforts to educate 
servicemembers and their families center around installation readiness 
facilities, pre-deployment and re-deployment process facilities, and 
reserve component mobilization and demobilization processing centers. 
This education and training is more sophisticated and detailed that it 
has even been. A validation of the Department's efforts is the fact 
that several of the largest SCRA-related enforcement actions originated 
with SMs and their legal assistance attorneys working together to 
enforce those very important rights. In addition, we are aware of 
additional litigation launched by private attorneys on behalf of 
Servicemembers as a class. Thus, we are aware of significant litigation 
involving SCRA protections and at least one on-going case in Georgia 
concerning the MLA. We hope that continued education about the MLA will 
preclude Servicemembers and their family members making use of 
prohibited credit products, essentially reducing the potential for 
litigation. In the event that a military borrower obtains a covered 
loan (without deceiving the creditor or colluding with the creditor), 
legal assistance attorneys and financial counselors will advise 
borrowers of their rights to take private action. Whether they wish to 
do so will still be their option.
                                 ______
                                 
  Response to Posthearing Questions Submitted by Hon. Mazie Hirono to 
                     the U.S. Department of Defense
    Question 5. In your testimony you mention that the Department ``has 
Personal Finance Managers (PFMs) at every installation.'' Does this 
mean that Ft. Bragg has a single PFM to service around 60,000 troops? 
What is the distribution of PFMs at Army installations in Hawaii?
    Response. Fort Bragg's Financial Readiness Program (FRP) has 19 
dedicated FPMs currently assigned to improve soldiers' personal 
financial status and their abilities to act as informed consumers. 
Direct assistance is provided to unit commanders and leaders on 
training Soldiers and family members in personal financial readiness. 
The Fort Bragg FRP also works closely with the adjacent Pope Air Force 
Base Airman and Family Readiness Center to ensure that Servicemembers 
and their families have access to one-on-one counseling services, as 
well as broad range of classes, workshops, and community resources to 
help military families meet their financial goals.
    Similarly, our PFMs have a robust presence of financial experts at 
Army installations in Hawaii. For example, the Army Community Service 
FRP at Schofield Barracks, Hawaii team has a versatile, professional 
team ready to serve Soldiers and family members, which includes over 10 
service providers, including four personal financial counselors and 
financial readiness specialists, a Military Family Life Consultant, an 
Army Emergency Relief officer, a social service representative, and two 
financial literacy instructors. The FRP stands ready and willing to 
assist all Soldiers, even those currently downrange. Additionally, the 
Military Family and Support Center (MFSC) is a newly established joint 
service center which synergizes the resources and know-how of Pearl 
Harbor's Fleet & Family Support Center and Hickam's Airman & Family 
Readiness Center.
    Across the Services, our knowledgeable, well-trained and 
experienced teams of social workers, educators and specialists provide 
assistance and community-based support to military families on 
everything from employment aid, education and counseling on money 
matters, and affordance access to childcare. Additionally, the 
``Military Saves'' campaign, co-sponsored by the Consumer Federation of 
America and the Department of Defense, has now become an integral part 
of the Department of Defense's comprehensive Financial Readiness 
Campaign. This past year alone, Military Saves reached 137,392 
servicemembers and families directly by installation efforts, along 
with another 163,000 through Facebook, 1.6 million Twitter impressions, 
and 35,000 visits to MilitarySaves.org. As led by ``our boots on the 
ground'' PFMs, the Department continues to develop a military command 
climate and overall culture that supports prudent financial behavior 
through financial literacy education and counseling.

    Question 6. Your testimony states that ``at critical times or with 
critical needs.'' there are additional resources--i.e. more PFMs, which 
you refer to as ``surge'' capability. Are these called upon in lecture 
setting only to meet with pre-deploying or re-deploying soldiers, or 
are they also used for servicemembers who are undergoing a permanent 
change of station or approaching their expiration term of service?
    Response. Through our Family Readiness System, the Department 
provides a broad range of financial management services to give our 
Active duty, Guard/Reserve and their families, regardless of 
mobilization status, the tools they need to achieve personal financial 
goals and address financial challenges at all at stages of a military 
career. Personal Financial Managers (PFMs) at military installations 
provide financial counseling and consultation services, ranging from 
budgeting, saving, debt reduction, consumer advocacy and complaint 
resolution, referral for emergency funds, financial workshops, 
retirement planning, and education programs for youth and teens. This 
includes proactive educational classes and workshops for the entire 
military community, as well as focused ``one-on-one'' professional 
financial counseling. In 2013, our PFMs provided over 34,867 briefings 
to a total of 872,187 participants, and provided individual counseling 
to 1,828,299 individuals, including 161,992 in-depth extended contacts.
    Moreover, as part of the Military Family Life Consultants (MFLC) 
program, our Personal Financial Counselors (PFCs) are available for 
``surge'' support assignments for bases and other units. PFCs augment 
the support offered by the Military Services PFMs to troops and 
families by providing financial education classes and workshops, 
counseling, and other assistance, especially in conjunction with 
planned deployment cycle events. Our financial readiness programs are 
focused on a 24/7 life-cycle delivery system that starts with mandatory 
entry-level training and progresses throughout a Servicemember's 
military career, to transition retiring and separating members 
successfully back into civilian life.
    Through this collaborative and comprehensive approach, our PFMs and 
PFCs support commanders in keeping Servicemembers and family members 
financially prepared and aware, such as understanding the benefits of 
the Uniform Thrift Savings Plan (TSP) and the importance of long term 
goals. In addition to mandatory unit training, a broad menu of classes 
is offered, such as checkbook management, personal financial 
management, credit report review and repair, car buying strategies, 
advice for first time home buyers, prevention of identity theft, and 
retirement planning. These full-spectrum proactive and responsive 
services can also be customized to meet the specific needs of an 
individual member or unit. For example, one workshop called ``Money 
Talk'' is designed to help military couples improve their communication 
about financial issues. Spouses are given valuable tools to conduct the 
``money talk'' conversation so expectations of financial issues are 
addressed prior to a Servicemember's return from deployment, to ease 
reintegration and reduce stress. For military families stationed in 
Hawaii, this training is especially valuable, since the cost of living 
is approximately 30% higher than on the mainland. Relying on this 
expert advice, couples learn to plan a budget, develop a family 
spending plan, get or stay out of debt, and enhance their long-term 
financial health.

    Question 7. Aside from these group lectures, how do individual 
soldiers seek counsel for their individual situations?
    Response. Individuals may either request financial counseling 
directly or be referred by leadership. Appointments can be made 
directly to the nearest Personal Financial Management (PFM) office, 
such as the Army Family Readiness Program, the USAF Airmen and Family 
Readiness Center, the Navy and Marine Corps Fleet and Family Support 
Center, or a Joint Service provider, such as the Military Family 
Support Center at Joint Base Pearl Harbor-Hickam. At the local level, 
Servicemembers and their families have immediate access to PFM 
counselors to discuss their concerns, and may also attend classes, 
online webinars, and workshops to help meet their financial goals. Many 
installation programs have an active online presence through social 
media, augmenting their ability to share information and helpful 
resources like the Military Saves campaign or Military OneSource.
    The Department also recognizes that financial readiness has a 
direct impact on our mission readiness, and that the promotion our PFM 
programs must be a leadership priority. The Military Services have 
created ``train the trainer'' courses for unit leaders to understand 
and leverage the tools available to promote, enhance, and maintain 
personal financial readiness. The Command Financial Non-Commissioned 
Officers Course (CFNCO), as one example, provides enlisted leaders with 
40 hours of instruction about the key programs, individual counseling 
services, and referral procedures available to assist Soldiers with 
financial difficulties. CFNCO prepares NCOs to serve as the battalion 
commander's in-house advisor on personal financial readiness issues and 
local consumer affairs. Each battalion-sized element has a financially-
savvy CFNCO who trains, organizes, implements and supervises the CFNCO 
program in the unit, and can refer individuals to PFMs and other 
resources, like legal assistance. The Commander's Referral Program, is 
another tool that Commanders and First Sergeants can use to deter 
families from relying on predatory leaders or high-interest credit, 
offering no-interest loans up to $2,500.
    Moreover, military and family members may seek free, confidential, 
and professional legal assistance regarding civil law and consumer 
rights issues at DOD installations worldwide. While legal assistance 
attorneys usually cannot represent family members directly in court, 
they can refer eligible clients to civilian experts via the American 
Bar Association's Legal Assistance for Military Personnel (LAMP) 
program. Our legal experts also can report consumer complaints to the 
Consumer Financial Protection Bureau (CFPB), U.S. Department of 
Justice, and State Attorneys General for potential enforcement action 
against financial institutions for abusive practices.

    Question 8. Furthermore, does the counseling provided vary to 
address the difficulties specific to each of these transitioning 
situations? For example, does it cover financial obligations 
servicemembers have agreed to that don't involve loans but can still 
impact credit (i.e. a gym membership)?
    Response. Yes. As a key element of our Family Readiness System, all 
Military Service Personal Financial Management (PFM) counselors are 
capable of providing advice tailored to the individual's concerns and 
community-specific issues. The one-on-one counseling services provided 
address a myriad of situations like the gym membership example 
mentioned above. As discussed, PFMs provide information and expert 
advice on a broad range of topics through a seminars, workshops, unit 
on-site visits, and one-on-one counseling.
    Emphasis is placed on sound money management, check writing, debit 
card principles, proper use of credit, credit report review and repair, 
effective financial planning for deployment, transition and relocation 
assistance, insurance management, debt elimination strategies, 
investment strategies, retirement planning, benefits under the 
Servicemembers Civil Relief Act (SCRA), and the consequences of 
predatory lending. For example, financial readiness workshops offered 
at Fort Bragg in 2013 covered ``Budgeting for Babies,'' ``Marriage 
Money Matters'' and ``Money Management for Teens,'' among other issues 
affecting the community at large. This proactive, life-cycle approach 
ensures that PFMs can help individuals develop a personal financial 
spending plan, learn tips to stay out of debt, and smartly manage their 
money throughout their careers. Servicemembers and dependent family 
members may also consult military legal assistance attorneys for advice 
on these issues, such as one's protection against harassment from debt 
collectors under the Fair Debt Collection Practices Act, or how to 
refer a consumer fraud complaint to the Consumer Financial Protection 
Bureau.
    The Department has developed financial readiness programs to 
promote financial literacy and sound planning over the entire course of 
a military member's career. This includes a broad umbrella of education 
and support services to assist military families in improving their 
financial well-being, financial self-sufficiency, and reducing 
financial stressors. Additionally, PFMs provide information and support 
concerning consumer awareness, consumer advocacy, and emergency 
financial assistance.

    Question 9. How does the Defense Manpower Data Center (DMDC) system 
protect against identity theft, given that the system is open to anyone 
who submits a request?
    Response. From April 1, 2012 through January 31, 2013, the 
Servicemembers Civil Relief Act (SCRA) Website responded to more than 
600 million inquiries from financial institutions, creditors, 
landlords, etc., for the Active Duty status of an individual, and of 
those 600 million, over 56 million of those inquiries were for 
individuals who were current or former Servicemembers or their spouses. 
The 56 million inquiries represent approximately 6 million unique 
current or former Servicemembers and their spouses who were provided 
protection through the use of the enhanced SCRA Web site, 24 percent of 
which were on active duty on the date specified in the Web site 
inquiry. Additionally, the Department of Justice (DoJ) used the SCRA 
Web site and Defense Enrollment Eligibility Reporting Systems (DEERS) 
data in several lawsuits against financial institutions in which funds 
were returned to the affected Servicemembers.
    Because the SCRA Web site is a public Web site (i.e., available to 
anyone with access to the Internet), and the information contained 
within it is sensitive in nature, the system includes several layers of 
protection of sensitive information. Creditors performing single-record 
checks must, for example, provide multiple data points in any query 
they make: last name and Social Security Number, or last name and date 
of birth. They receive in response only a data point that indicates 
whether the Servicemember was on active duty at the time requested.
    DMDC has developed the SCRA Batch process to respond to requests 
coming from financial institutions. The SCRA Batch process requires 
that the institution have a Secure File Transfer Protocol (SFTP) site 
that can be accessed by the SCRA Batch process. The input files 
submitted shall contain all of the information required to check the 
active duty status of each person on a specified date in the file. The 
return batch file will contain all of the information originally 
provided, plus the additional information necessary to determine active 
duty status on the date of interest. Thus, when utilizing batch 
processing, creditors or financial institutions must provide all 
required data and receive in response only that data they supplied 
previously, plus information as to whether the Servicemember was on 
active duty on the date specified or within 367 days thereof. In other 
words, DMDC provides no additional sensitive or personal information 
which the creditor or financial institution does not already possess 
and provide in their inquiry regarding the Servicemember.

    Chairman Sanders. Colonel, thank you very much.
    Mr. Halperin.

 STATEMENT OF ERIC HALPERIN, SPECIAL COUNSEL FOR FAIR LENDING, 
       CIVIL RIGHTS DIVISION, U.S. DEPARTMENT OF JUSTICE

    Mr. Halperin. Good morning, Chairman Sanders, Senator 
Boozman, and Members of the Committee. Thank you for holding 
this hearing on preserving the rights of servicemembers, 
veterans, and their families in the financial marketplace. It 
is a privilege to speak with you today about our shared 
priority of protecting the rights of our men and women in 
uniform.
    Over the past 4 years, the Department of Justice has made 
enforcement of the Servicemember Civil Relief Act, or SCRA, a 
top priority. I am pleased to share with you today some of the 
recent successes we have had in ensuring that servicemembers' 
homes and credit are protected while they serve our Nation. We 
have also learned some important lessons from our enforcement 
efforts and have been reviewing ways to strengthen the SCRA.
    The Civil Rights Division enforces several laws designed to 
protect the rights of members of the military, one of which is 
the SCRA. The SCRA's protections are important because 
servicemembers should not have to worry that their family could 
lose their home while they are on deployment, or that their 
cars will be repossessed while they are on the front lines 
overseas, or suffer financial penalties from landlords because 
they have been ordered to move to a different duty station.
    Members of the military who made great personal sacrifices 
on behalf of this country should not be required to transition 
to civilian life only to find their credit ruined and their 
home sold off. That is why, over the past 4 years, the 
Department has filed more SCRA enforcement actions than ever 
before.
    For example, during one of our investigations we discovered 
a servicemember who was severely injured by an improvised 
explosive device while serving in Iraq, breaking his back and 
causing Traumatic Brain Injury. His loan servicer foreclosed on 
him improperly, despite receiving notice on multiple occasions 
that he was serving in Iraq. That should never happen.
    Behind our enforcement actions are countless other stories 
of hardship experienced by servicemembers and their families as 
a result of failures of lenders and servicers to comply with 
the law. In 2012, the Division reached settlements with the 
Nation's five largest mortgage loan servicers who agreed to 
compensate all servicemembers they improperly foreclosed on or 
charged unlawfully high interest rates.
    This settlement, along with three other wrongful 
foreclosure settlements reached by the Division in 2011 and 
2012 will ensure that the vast majority of foreclosures against 
servicemembers will be subject to court-ordered review.
    Most servicemembers illegally foreclosed on will receive 
$125,000 plus any equity lost in their home. In addition, these 
settlements require servicers to submit their SCRA policies and 
procedures to the Department for review and approval, and to 
submit to ongoing monitoring by the Department.
    As you know, the SCRA's protections extend well beyond 
mortgages. In July 2012, we resolved our complaint against 
Capital One and filed one of the most comprehensive SCRA 
settlements ever obtained by the Government agency or any 
private party. The case involved allegations of a variety of 
violations, including wrongful foreclosures, improper 
repossessions of motor vehicles, wrongful court judgments, and 
improper denials of the 6 percent interest rate that the SCRA 
guarantees to servicemembers on pre-service credit card and 
other loans.
    As a result of our enforcement over the last 4 years, 
servicers and lenders are required to pay more than $50 million 
in monetary relief to servicemembers and that number will 
increase once the foreclosure reviews of the five largest 
servicers are completed.
    The Civil Rights Division enforcement actions have 
addressed the full range of protections under the SCRA, 
including a number of cases that do not involve the financial 
services industry, such as wrongful charges by landlords. In 
enforcing the SCRA, we have worked closely with our Federal and 
State partners.
    The Department of Defense has been invaluable to our 
enforcement efforts, especially our ability to bring large 
pattern and practice cases, and the CFPB has been a critical 
source of information about the financial challenges facing 
servicemembers and potential SCRA violations in the 
marketplace.
    While vigorous enforcement of the SCRA is critical, we 
recognize that to maximize compliance with the law, we also 
need to engage at outreach and education to industry and the 
military community to inform people of their rights and 
responsibilities. That is why the Department engages directly 
in outreach, as do our partners at other agencies.
    Although we have achieved great successes on behalf of 
servicemembers, we have also identified ways that the SCRA 
could be strengthened. In September 2011, the Administration 
formally transmitted to Congress a package of proposals for 
strengthening all three servicemember civil rights statutes 
that the Division enforces, including the SCRA.
    We were gratified to see that this Committee considered 
many of our proposals in the last Congress. We are actively 
considering additional improvements and we look forward to 
working with you in this Congress to strengthen the SCRA, and 
we hope to see these proposals enacted into law.
    Our recommendations include codifying the rule that a party 
seeing a default judgment against a servicemember must check 
the Department of Defense records to determine whether the 
servicemember is on active duty, and granting the Department 
the authority to compel the production of existing documents 
during our SCRA investigations.
    The Department appreciates the opportunity to report on the 
SCRA and we stand ready to work with the Committee in 
strengthening this important law. Thank you for the opportunity 
to testify today and I look forward to answering your 
questions.
    [The prepared statement of Mr. Halperin follows:]
 Prepared Statement of Eric Halperin, Acting Deputy Assistant Attorney 
       General, Civil Rights Division, U.S. Department of Justice
    Good morning, Chairman Sanders, Ranking Member Burr, and Members of 
the Committee. Thank you for holding this hearing on preserving the 
rights of servicemembers, veterans and their families in the financial 
marketplace. It is a privilege to speak with you today about our shared 
priority of protecting the rights of our men and women in uniform.
    Over the past four years, the Department of Justice has made 
enforcement of the Servicemembers Civil Relief Act (SCRA) a top 
priority. I am pleased to share with you today some of the recent 
successes we have had in working with the Department of Defense and the 
Office of Servicemember Affairs at the Consumer Financial Protection 
Bureau to ensure that servicemembers' homes and credit are protected 
while they serve our Nation. We have also learned some important 
lessons from our enforcement efforts over recent years and have been 
reviewing ways this law could be amended to better protect the rights 
of servicemembers.
                  i. scra enforcement accomplishments
    The Civil Rights Division enforces several laws designed to protect 
the rights of members of the military, including the SCRA which 
provides a wide-range of protections. Among other protections, the SCRA 
postpones, suspends, terminates, or reduces the amount of certain 
consumer debt obligations for active duty members of the Armed Forces, 
so that they can focus their full attention on their military 
responsibilities without adverse consequences for themselves or their 
families. Among these protections are: (1) a prohibition on foreclosure 
of a servicemember's property without first getting approval from the 
court if the servicemember obtained the loan prior to entering military 
service, (2) a prohibition on foreclosure of an active duty 
servicemember's property through a default judgment without first 
filing an affidavit alerting the court to the servicemember's military 
status, and (3) the right of a servicemember to have his or her 
interest rate lowered to six percent on debt that was incurred before 
entering military service.
    These protections are in place because servicemembers should not 
have to worry--that their cars will be repossessed while they are on 
the front lines overseas, that they could lose their home, or that 
their spouses and children will be evicted while they are on 
deployment.
    Enforcing these rights has been a top priority of the Division 
under the leadership of Attorney General Holder and former Assistant 
Attorney General Perez. Members of the military who have made great 
personal sacrifices on behalf of this country should not be required to 
transition to civilian life only to find their credit ruined and their 
homes foreclosed on and sold. In enforcing the SCRA, we have worked 
closely with our Federal and state partners. The Department of Defense 
has been invaluable to our enforcement efforts, especially our ability 
to bring large pattern or practice cases, and the CFPB has been an 
important source of information about the financial challenges facing 
servicemembers.
A. Wrongful Foreclosure Cases
    In 2011, we reached two multi-million dollar settlements on behalf 
of servicemembers whose homes had been foreclosed on without court 
orders while they were on active duty or shortly after they had 
returned from active duty. The first settlement was for over $38 
million with Bank of America. The Bank of America case began with a 
referral from the United States Marine Corps on behalf of a 
servicemember who was deployed to Iraq. Bank of America was scheduled 
to sell that servicemember's home at a trustee's sale in three days, 
even though the bank had already received a copy of his military 
orders. In the course of our investigation and settlement negotiations, 
the Department found that 309 servicemembers' homes were illegally 
foreclosed on between 2006 and 2010. Under the consent decree, Bank of 
America will pay each victim a minimum of $116,785, plus compensation 
for any equity lost with interest.
    Under our second settlement, Saxon Mortgage Services Inc. is in the 
process of paying out over $2.5 million to 19 servicemembers whose 
homes were unlawfully foreclosed upon between 2006 and 2010. Each 
servicemember will receive a minimum of $130,555, plus compensation for 
any equity lost with interest.
    Under both settlements, the banks have agreed not to pursue any 
remaining amounts owed under the mortgages; to take steps to remedy 
negative credit reporting; and to implement enhanced measures, 
including monitoring, training, and checking loans against the Defense 
Manpower Data Center's SCRA database during the foreclosure process.
    In February 2012, we filed consent orders with Bank of America, 
JPMorgan Chase & Co., Wells Fargo & Company, Citigroup Inc., and Ally 
Financial, Inc. (formerly GMAC) in United States, et al., v. Bank of 
America Corp., et al. (D.D.C.). These consent orders are known as ``the 
National Mortgage Settlement,'' which was reached by the United States, 
49 state attorneys general, the District of Columbia and the five 
servicers in 2012. Under these agreements, loans serviced by the 
Nation's five largest mortgage loan servicers are being reviewed to 
find all servicemembers foreclosed on either judicially or non-
judicially in violation of the SCRA since 2006, and to find all 
servicemembers unlawfully charged interest in excess of six percent on 
their mortgages since 2008. As a result of these settlements, combined 
with the Department's other SCRA settlements, the vast majority of all 
foreclosures against servicemembers are now subject to court-ordered 
review.
    Under the National Mortgage Settlement, most servicemembers wrongly 
foreclosed on will receive $125,000 plus any lost equity with interest. 
For the foreclosure violations that took place in 2009 and 2010, the 
Justice Department is coordinating with the Office of the Comptroller 
of the Currency and the Federal Reserve Board, which are conducting 
separate reviews of 12 mortgage servicers under the Independent 
Foreclosure Review process.
    Under the National Mortgage Settlement, Servicemembers who were 
denied a required reduction to a six percent interest rate will also 
receive a minimum of four times the amount wrongfully charged in excess 
of six percent. The financial compensation to servicemembers provided 
by the settlement is in addition to the $25 billion in relief the 
settlement provides to homeowners based on the servicers' illegal 
mortgage loan servicing practices.
    Behind each of these settlements are stories of servicemembers who 
have made great sacrifices for our country, only to have their rights 
violated at home. For example, we encountered a case involving a 
servicemember who was severely injured by an Improvised Explosive 
Device while serving in Iraq, breaking his back and causing Traumatic 
Brain Injury. The servicer foreclosed on him, despite receiving notice 
on multiple occasions that he was serving in Iraq. He returned to the 
United States in a wheelchair with the prognosis that he would never 
walk again. He spent two years in recovery, during which time he re-
learned how to walk and eventually run; however, he still suffers from 
the impact of Traumatic Brain Injury. Under our settlement, the 
servicemember received $130,651 and is eligible to have his credit 
report corrected to reflect that the foreclosure was not valid.
    In another case, we encountered a victim who suffers from Post-
Traumatic Distress Syndrome after a tour in Iraq in 2003-2004. 
Consequently, he regularly receives counseling and takes medication to 
address his nightmares and nervous condition. In an attempt to avoid 
foreclosure on his home, he notified the servicer of his active duty 
status and provided copies of his orders. However, the servicer 
foreclosed on him twice despite notice of his protected status.
B. Wrongful Foreclosures, Repossessions and Court Judgments; Improper 
        Denials of Six Percent Interest Rate
    In July 2012, we filed and settled United States v. Capital One, 
N.A. (E.D. Va.), one of the most comprehensive SCRA settlements ever 
obtained by a government agency or any private party under the SCRA. 
Under the consent order, Capital One agreed to pay more than $15 
million in monetary relief to resolve allegations of a variety of SCRA 
violations, including wrongful foreclosures, improper repossessions of 
motor vehicles, wrongful court judgments, improper denials of the six 
percent interest rate that the SCRA guarantees to servicemembers on 
pre-service credit card and other loans, and insufficient six percent 
benefits granted on credit cards, car loans and other types of 
accounts. The agreement requires Capital One to pay approximately $7 
million in damages to servicemembers for SCRA violations, including at 
least $125,000 plus compensation for any lost equity (with interest) to 
each servicemember whose home was unlawfully foreclosed upon, and at 
least $10,000 plus compensation for any lost equity (with interest) to 
each servicemember whose motor vehicle was unlawfully repossessed. In 
addition, the agreement required Capital One to create a $5 million 
fund to compensate servicemembers who did not receive the appropriate 
amount of SCRA benefits after requesting a reduction to a six percent 
interest rate on their credit card accounts, motor vehicle finance 
loans, and consumer loans. Approximately $3 million of this fund was 
used as payments to servicemembers. The remaining approximately $2 
million has been donated by Capital One to military emergency aid 
societies. Thousands of servicemembers who were victims of Capital 
One's unfair lending practices will be identified and compensated, with 
no action required on their part, for loans dating back to July 15, 
2006, and those whose credit scores were damaged because Capital One 
violated the SCRA will have their credit scores repaired.
                  ii. comments on pending legislation
    Through our enforcement work, we have achieved great successes on 
behalf of servicemembers, but we have also identified ways that the 
SCRA could be strengthened to better protect the rights of 
servicemembers. In September 2011, the Administration formally 
transmitted to Congress a package of proposals for strengthening all 
three statutes enforced by the Civil Rights Division that protect the 
rights of servicemembers and their families, including the SCRA,\1\ and 
we are eager to work with the Committee on these proposals. We were 
pleased that, last Congress, then-Chairwoman Senator Patty Murray 
included many of our proposals in S. 2299, the ``Servicemembers Rights 
Enforcement Improvement Act.''
---------------------------------------------------------------------------
    \1\ The other two statutes are the Uniformed Services Employment 
and Reemployment Rights Act (USERRA) and Uniformed and Overseas 
Citizens Absentee Voting Act (UOCAVA).
---------------------------------------------------------------------------
    These proposals, if passed, would:

     Double the amount of civil penalties currently available 
under the SCRA, to $110,000 for a first violation and $220,000 for 
subsequent violations;
     Codify the rule that a party seeking a default judgment 
against a servicemember must check Department of Defense records to 
determine whether the servicemember is on active duty;
     Clarify retroactive application of provisions establishing 
a private right of action and the authority of the Attorney General to 
enforce the SCRA; and
     Grant civil investigative demand authority to the Attorney 
General to compel the production of existing documents in SCRA 
investigations.

    When Congress amended the SCRA to provide for civil penalties in 
2010, it used the amounts authorized under the Fair Housing Amendments 
Act. These amounts, however, have not been adjusted for inflation or 
for any other reason since 1999. Some violations of the SCRA involve 
small monetary amounts, making the civil penalty critical to ensuring 
compliance.
    We urge the Committee to amend the SCRA's affidavit requirement, 
which provides that a party seeking foreclosure or other default 
judgment against a servicemember must first file with the court an 
affidavit stating whether or not the servicemember is in military 
service, to clarify that such requirement includes the obligation to 
take reasonable steps to determine the servicemember's military status. 
Such steps would include, but are not limited to, searching available 
Department of Defense records. The amendment would simply codify what 
several courts have already held.
    We also urge the Committee to amend the SCRA to clarify that the 
private right of action and the Attorney General's authority to enforce 
the SCRA, which were made explicit in the Veterans' Benefits Act of 
2010, apply retroactively to violations occurring before the date of 
enactment of that Act. This would be consistent with the Department's 
litigating position and with the recent decisions of the United States 
Court of Appeals for the Fourth Circuit, and would ensure that the SCRA 
rights of all servicemembers can be vindicated.
    Finally, the Department urges the Committee to amend the SCRA to 
provide the Attorney General with civil investigative demand (CID) 
authority. The Department of Justice has no pre-suit investigative 
authority under the SCRA, and must rely on voluntary cooperation from 
the subjects of our investigations. Greater investigative authority 
would strengthen the Department's ability to enforce the SCRA, 
especially through pattern or practice suits.
    In addition, the Administration has proposed as part of the FY 2014 
National Defense Authorization Act to give the Department the ability 
to bring enforcement actions under the Military Lending Act (MLA) if 
violations of that Act constitute a pattern or practice or raise an 
issue of public importance. This is analogous to the Department's 
enforcement authority under the SCRA and would allow for more efficient 
and effective law enforcement, especially when actors are engaged in 
conduct that potentially violates both the MLA and the SCRA.
    We will continue to work with Congress to identify areas in which 
additional legislative changes would improve enforcement of the SCRA 
and the MLA, which also extends vital economic protections to our 
servicemembers, and anticipate advancing additional legislative 
proposals this Congress.
                          iii. looking forward
    The Department appreciates the opportunity to report on our 
accomplishments in enforcing the SCRA, and to comment on our 
legislative proposals to strengthen the SCRA. We stand ready to work 
with the Committee in strengthening this important law that protects 
the rights of our servicemembers.

    Thank you for the opportunity to testify today, and I look forward 
to answering your questions.
                                 ______
                                 
Response to Posthearing Questions Submitted by Hon. Bernard Sanders to 
Eric Halperin, Special Counsel for Fair Lending, Civil Rights Division, 
                       U.S. Department of Justice

[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]

                                 ______
                                 
Response to Posthearing Questions Submitted by Hon. John D. Rockefeller 
  IV to Eric Halperin, Special Counsel for Fair Lending, Civil Rights 
                  Division, U.S. Department of Justice

[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]

                                 ______
                                 
  Response to Posthearing Questions Submitted by Hon. Mazie Hirono to 
Eric Halperin, Special Counsel for Fair Lending, Civil Rights Division, 
                       U.S. Department of Justice

[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]


    Chairman Sanders. Thank you all very much. We have been 
joined by Senator Hirono. I just learned that we are going to 
have votes at 10:55, so we are going to take questions now, 
move to the next panel, and we will be out of here by that 
time.
    Let me start with you, Mrs. Petraeus. A law only good if 
people know about it. So, we can have the best laws in the 
world, but if people do not know about it, it does not do us 
all that much good. In your judgment, do the men and women who 
serve in the military, in fact, know what protections they 
have?
    Ms. Petraeus. Well, I think that might be a question that 
Colonel Kantwill could answer better. I can tell you that some 
of the people who answer the phone at loan servicers do not 
know the law and do not apply it properly. We continue to have 
real concerns about what we have seen in that area. We just saw 
a complaint come in this past week where someone told a 
servicemember that in order to be eligible for the SCRA, they 
needed to have been on active duty on or after September 11, 
2001, which, of course, was completely incorrect.
    So, I think there is an awareness of the law, but again, 
people are misapplying its provisions, giving out wrong 
information. I think the Department of Defense--I cannot speak 
for them, but I think they are trying hard to raise awareness 
about that among servicemembers before they go onto active duty 
so they know what they have.
    Many of them enter the military with loans, student loans, 
some with mortgages, some with other debt, and it is important 
that they know that they can reduce--ask to have that interest 
rate reduced.
    Chairman Sanders. Let me ask Colonel Kantwill that same 
question, because that is within your jurisdiction. Are we 
doing a decent job so that members of the military know what 
their rights are?
    Colonel Kantwill. I think we are, sir, and I think we are 
doing a much, much better in recent years. And I would answer 
that in two parts, if I may. On the active duty side of the 
house, the legal community has been absolutely essential in our 
outreach programs. We now have legal folks who are briefing 
folks when they reach the installation level, when they leave 
the installation, in-processing and out-processing, as it were.
    In pre-deployment briefings and in post-deployment 
briefings as well, and we found that that has been very, very 
effective.
    Chairman Sanders. And that information is getting back to 
the folks at home as well so the spouse knows?
    Colonel Kantwill. Absolutely, sir. We have family support 
groups and other sort of mechanisms on the installations that 
invite the family support groups in, the individual family 
members as well. They get the same briefings. Preventive law 
articles appear in the community newspapers, on the community 
channels on the installations, et cetera. The news gets out 
very, very well.
    A bigger challenge has been on the Reserve component side 
of the house, admittedly, particularly when we have got a 
smaller window of boots-on-the-ground time, as you know well. 
That has pushed into the home station training a lot more that 
we were able to do at the mobilization stations in the past. 
But once again, I think we have met that challenge, and we have 
been able to do it largely through the legal community, both in 
pre-mobilization briefings and in post-mobilization briefings, 
and through the use of the legal assets that are habitually 
assigned to those organizations in regard to----
    Chairman Sanders. Let me get to Mr. Halperin. You indicated 
in your testimony a number of the largest financial 
institutions in this country have been involved in ripping off 
men and women in the Armed Forces. Have we been aggressive in 
going after these financial institutions? Are you happy with 
the settlement that was reached?
    Mr. Halperin. The settlement we reached with the five 
largest financial institutions, we think, is a fair, good, 
strong settlement on several fronts. So, on front, in terms of 
compensating our servicemembers, it ensures that every single 
servicemember who was improperly foreclosed on between 2006 and 
April 2012 will be compensated at a minimum level of $125,000.
    And there is no cap on that. The financial firms that we 
reached a settlement with agreed to compensate every single 
person we found. There is no limitation.
    Chairman Sanders. Are there any criminal penalties involved 
here?
    Mr. Halperin. This settlement was a civil settlement. The 
Civil Rights Division enforces the civil provisions of the 
SCRA. The criminal provisions are enforced by our colleagues in 
the Criminal Division and at U.S. Attorney's offices. And 
although there is no criminal element of this civil settlement, 
I do know that our colleagues have brought criminal indictments 
in other cases and I would be happy to have them provide that 
information to you.
    Chairman Sanders. Are you reasonably confident that the 
banks will end this type of behavior?
    Mr. Halperin. Well, the second component of the settlement 
is the going-forward piece, which is vitally important to 
ensuring compliance going forward. So, under the settlement, 
all their policies and procedures around the SCRA needed to be 
submitted to us and were approved by us. Then the settlement 
includes, for a period of years, direct monitoring by the Civil 
Rights Division, and provisions in place that, in the event any 
servicemember's SCRA rights are violated, automatic remedies 
kick in.
    Hopefully, the goal of those compliance policies is, if for 
some reason anyone slips through the cracks, it is caught 
quickly and quick enough so the foreclosure does not happen, 
because money is good, but it is not an adequate remedy to 
replacing someone's home.
    Chairman Sanders. Thank you. Senator Boozman, Senator 
Hirono, I understand, has to preside at 10:30. Is that the 
case? Would you mind if she jumped the line?
    Senator Boozman. Not at all.
    Chairman Sanders. Senator Hirono.

                STATEMENT OF HON. MAZIE HIRONO, 
                    U.S. SENATOR FROM HAWAII

    Senator Hirono. Thank you, Mr Chairman, and thank you, 
Senator Boozman. I want to commend all of you for your 
commitment in helping our servicemembers, veterans and their 
families because they are very much, based on the testimony and 
the information I get from the calls, that my office gets, that 
they are often targeted for all kinds of, whatever it is 
called, predatory practices.
    Ms. Petraeus, I note in your testimony that you made 
reference to a Florida law that provided enhanced protections 
against various kinds of practices that target veterans and 
servicemembers, enhanced unfair trade practice kind of laws. Do 
you consider that kind of an approach effective at the State 
level?
    Ms. Petraeus. I think the States can certainly build on and 
enhance what is done here at the Federal level. In this case, 
the State of Florida chose to provide extra penalties to those 
who ripped off veterans, and it also put the veterans who had 
been injured ahead of others in the queue for any damages that 
resulted from the suits. So, I think it can enhance protection. 
So, yes, a multifaceted approach like that is great.
    Senator Hirono. Have other States followed suit with these 
kinds of enhanced protective laws?
    Ms. Petraeus. I think there are a number of them. I would 
have to do some research to specify, but there are many States 
that, I think, have real concern for the military families that 
live and work there and have provided extra protections for 
them.
    Senator Hirono. Certainly, Hawaii is a State where there is 
a huge military presence as well as many veterans.
    I want to focus on the educational parts, because that is 
really where a lot of abuses occur. There is the 90/10 Rule. 
You are very familiar, all of you, with the fact that for-
profit colleges are restricted from receiving more than 90 
percent of their revenues from Federal sources, but 10 percent 
can come from those receiving or using G.I. benefits. Do you 
consider that a loophole that should be closed?
    Ms. Petraeus. I think it provides a real incentive to chase 
after servicemembers and use unscrupulous tactics to sign them 
up. And I mentioned in my statement one I heard about from a VA 
representative in Nevada who was doing rehab for vets with 
brain injuries and basically was appalled at the tactics where 
they were being pursued to sign up, not only for undergrad 
degrees, but master's degrees.
    Senator Hirono. So, if we pursue a remedy such as requiring 
that the G.I. Bill loans be included in the 90 percent, that 
would take away the incentive for some of these bad actors from 
targeting veterans?
    Ms. Petraeus. Yes, I think it would remove some of the 
incentive that is there now.
    Senator Hirono. Would the other panel members agree that 
that might be a fruitful approach?
    Colonel Kantwill. That is a bit outside of my purview, 
ma'am, but I can tell you that the Department is absolutely 
committed to protecting our servicemembers in every respect, 
and we would be happy to work with the Congress in this regard.
    Mr. Halperin. Yes, Senator, that is also outside of our 
purview under the SCRA. But I will note that under the SCRA, we 
are concerned with loans that are taken out while not on active 
duty, and then when someone becomes activated whether they get 
the full benefits of the 6 percent reduction when they request 
it. And we do have active investigations in that area, looking 
into a failure to provide servicemembers the full benefits 
under SCRA.
    Senator Hirono. So, even if these areas are not within your 
purview, you do collaborate and work together so that we are 
all going to the same goal of protecting our active duty 
servicemembers and veterans and their families. And with that, 
I want to thank the Chair and Senator Boozman. Thank you so 
much.
    Chairman Sanders. Thank you, Senator Hirono. Senator 
Boozman, I thank you very much for your courtesy.
    Senator Boozman. Thank you all so much for being here and 
we really do appreciate your advocacy and hard work, again, 
protecting our servicemembers.
    Colonel Kantwill, you mentioned that things seem to be 
going well as far as the education process. Do we have any 
metrics in place that we could perhaps measure that to make 
sure that rather than just being anecdotal evidence, that we 
really do know what is going on?
    Colonel Kantwill. I can certainly take that back, sir, and 
see if we can provide some metrics for you. I can tell you that 
we do have indications such as the Military Saves campaign, 
which we have unprecedented participation in the past couple of 
years, are indicative of that, but we will be happy to come 
back to the Committee with more specific information. Thank 
you.

    [The information requested during the hearing follows:]
Response to Request Arising During the Hearing by Hon. John Boozman to 
      Col. Paul Kantwill, Director of Legal Policy, Office of the 
 Undersecretary for Personnel and Readiness, U.S. Department of Defense
    The financial readiness of servicemembers and their families is a 
priority for the Department of Defense, as we recognize this issue has 
a direct impact on our mission readiness. Our efforts, therefore, are 
geared toward increasing the financial literacy of military families, 
and ensuring they know the resources available through our full-
spectrum Family Readiness System programs. The Department is currently 
preparing a large-scale, multifaceted, and multi-year evaluation 
project to measure outcomes on DOD-wide family support programs, as 
well as developing a full portfolio of performance measures. This 
includes the Family Readiness Program Evaluation Plan Development 
Project, in collaboration with Penn State University, as well as a 
systematic review of Existing Personal Finance Data (DMDC Status of 
Force Surveys). The DOD has also increased it support partnerships 
through official Memorandums of Understanding (MOU) with Federal and 
non-profit agencies to leverage their expertise in promoting financial 
readiness. At this early stage, we can report several positive 
indicators that we are moving in the right direction in developing a 
military command climate and overall culture that supports prudent 
financial behavior through financial literacy education and counseling.
    In addition to mandatory training for all entry-level 
Servicemembers, we are seeing increased participation by members and 
their families in our voluntary classes, workshops, and one-one 
financial planning and counseling services. In 2013 alone, our PFMs 
provided over 34,867 briefings to a total of 872,187 participants, and 
provided individual counseling to 1,828,299 individuals, including 
161,992 extended contacts. Across the Services, our knowledgeable, 
well-trained and experienced teams of social workers, educators and 
specialists presently provide assistance and community-based support to 
military families on everything from money management, check writing, 
credit report review and repair, financial planning for deployments, 
debt elimination, investment strategies, retirement planning and 
transition assistance. This translates into more financially-savvy, 
less-stressed military families, who are able to proactively develop 
financial spending plans, manage debt, invest wisely, and save for 
retirement.
    Another key metric we observe is the quarterly participation in the 
Thrift Savings Program (TSP) data by Service and rank. Due to entry-
level briefings, as well as command support, we continue to see a 
gradual uptick in participation, particularly in the Navy, which now 
reports that approximately 47 percent of its officers and 56 percent of 
its enlisted members have elected to participate in TSP, as part of 
their long-term savings plan.
    The ``Military Saves'' campaign, now in its seventh year, continues 
to see unprecedented participation. Co-sponsored by the Consumer 
Federation of America and the Department of Defense, this program has 
now become an integral part of our comprehensive Financial Readiness 
Campaign. This past year alone, Military Saves reached 137,392 
servicemembers and families reached directly by installation efforts, 
along with another 163,000 through Facebook, 1.6 million Twitter 
impressions, 35,000 visits to MilitarySaves.org. Over 29,307 new 
individuals took the Military Saves pledge in 2013 to ``build wealth, 
not debt,'' while encouraging others to do the same. As led by ``our 
boots on the ground'' PFMs, the Department continues to develop a 
military command climate and overall culture that supports prudent 
financial behavior through financial literacy education and counseling.
    We have also sought to identify key trends through scientific 
surveys, such as the Military Family Life Project (MFLP), using a 
representative sample of the military population, including military 
spouses. In the 2010-2011 MFLP surveys, approximately 59 percent of 
spouses reported being comfortable about their financial condition, 
while 25 percent reported feeling less comfortable, and while 16 
percent reported they were uncomfortable about their financial 
condition. These numbers remained consistent in the 2011 MFLP. We will 
continue to track these important indicators to ensure our 
comprehensive financial readiness programs are responsive to, and 
supportive of the needs and concerns of military families.
    Furthermore, we have observed recent upward trends in savings 
habits in all career fields. As indicated by our 2011 MFLP survey 
(Figure 1.1), 66 percent of total military members now report having 
$500.00 or more in emergency savings, and 64 percent save regularly by 
putting aside money per month. For our entry level and most junior 
personnel, this breaks down to 45 percent having $500.00 or more in 
emergency savings, and 51 percent with continued savings. These are 
positive signs as we continue to enrich the financial readiness of our 
Total Force.
                               Figure 1.1

[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]


    Senator Boozman. I think that would be really helpful, if--
again, I am not saying that we are not doing a good job of 
that, and yet, I do think it is important to measure things.
    Mrs. Petraeus, you mentioned the incident with the 
unscrupulous for-profit college recruiters in VA hospitals, and 
again, we can argue the appropriateness of that or not. I think 
if you go through the--so many members of the service, because 
they have a lot of leeway in how they get the education program 
benefits, a lot of for-profits, you know, many people have 
benefited from that. Yet, as you indicated earlier in your 
testimony, I guess my concern is why, if you have a situation 
like that, is the commanding officer not aware as to what can 
be done, maybe working with Mr. Halperin or Colonel Kantwill, 
to remedy that?
    I mean, that is so cut-and-dried. I think that is a blatant 
thing that we simply should not be tolerating. One of the 
frustrations I have had a little bit, which I would like to 
broaden a little, is that sometimes it is really hard to figure 
out, not particularly this law, but protecting servicemembers 
and veterans in general.
    It is really difficult to figure out which agency that we 
direct preditor complaints to so that they can go after them. 
But in this case, to me, it seems like we have got a little bit 
of a breakdown, perhaps Colonel Kantwill, Mrs. Petraeus, Mr. 
Halperin, in the sense that the commanders have the ability to 
know who can put the fear in whoever is doing that.
    Ms. Petraeus. Well, I would mention that these are 
veterans, so they are no longer in the active duty military and 
they would not have a chain of command like that.
    Senator Boozman. But you have got somebody--you have got a 
chain of command in the hospital.
    Ms. Petraeus. Yeah, and I think one concern has been, 
really, the lack of sort of a central complaint portal to 
actually report issues like this, and that has been addressed 
by the President in his Executive Order and Congress as well 
has looked at it. They are working hard to have one place to go 
where you can field these complaints. And we look forward to 
having that database up and running.
    I was testifying last week with the folks from the VA and 
they said they hope to have that going by the fall. So, we hope 
that when the word gets out about that, that people will know 
where they can go with complaints and then they can addressed 
more effectively.
    Senator Boozman. It is really difficult, you know, if you 
do not know who to complain to and where to find enforcement. 
Talk to me a little bit about--right now we have come out with 
a short form as far as complaining. Do people know about that? 
Is that being used? Can you talk a little bit about the 
frequency that--I know one of the problems was that things were 
pretty complex. We have made that simpler with a short form. 
Can you talk a little bit about that?
    Colonel Kantwill. Yes, Senator. The short form relates more 
to the servicemembers' ability to apprise the financial 
institution that they wish to avail themselves of protections. 
We developed that form with our colleagues at the Financial 
Services Roundtable in the Housing Policy Council. It has been 
distributed to the force and it looks like it is working very, 
very well.
    In short, it makes military orders, which can be very 
complicated and difficult to read, much easier to use by the 
financial institutions. So, that has helped. On the complaint 
front, sir, two of the biggest settlements that my colleagues 
have discussed were begun by individual servicemembers making 
complaints through legal assistance attorneys. So, we think we 
are doing very well in this regard as well.
    Senator Boozman. Good. That is excellent. Thank you, Mr. 
Chairman.
    Chairman Sanders. Thank you, Senator Boozman. Let me just 
thank the panel for their excellent work on this very, very 
important issue. We look forward to working with you all in the 
future. Thanks very much for being with us this morning.
    I want to welcome Mr. Paul Leonard who is the Senior Vice 
President at the Housing Policy Council of the Financial 
Services Roundtable. I want to thank you very much for being 
with us today. Mr. Leonard, if you would like to begin, we 
would love to hear from you.

   STATEMENT OF PAUL LEONARD, SENIOR VICE PRESIDENT, HOUSING 
       POLICY COUNCIL, THE FINANCIAL SERVICES ROUNDTABLE

    Mr. Leonard. Thank you, Mr. Chairman and Senator Boozman, 
for holding this important hearing today. I am Paul Leonard, 
Senior Vice President of Government Affairs for the Housing 
Policy Council, which is part of the Financial Services 
Roundtable. Our members are the leading national mortgage 
finance companies.
    Our President, John Dalton, was unable to testify today and 
sends his apologies to the Committee. Secretary Dalton served 
as the Secretary of the Navy for 5 years and has a strong 
personal interest in this issue. I know this is an important 
issue for the Chairman and Members of the Committee.
    Our members are intensely focused on strengthening their 
ability to comply with the Servicemembers Civil Relief Act and 
to improve their customer service for military personnel, 
veterans, and their families. We appreciate the leadership of 
Colonel Kantwill, the Department of Defense, Mrs. Petraeus and 
the CFPB, and the Congress in this effort.
    My testimony will focus on industry efforts to improve 
their SCRA compliance and other efforts to assist veterans and 
military personnel. On SCRA, our member companies are working 
diligently to fully comply with all elements of SCRA. While the 
SCRA requires that a servicemember notify their financial 
services company to activate certain benefits such as the 6 
percent cap, lenders recognize they have responsibilities, 
liability, and reputational risks should they foreclose on a 
property, regardless of whether notification was provided.
    As Congress considers expanding SCRA to cover new 
consumers, we also ask that you examine improving the Defense 
Manpower Data Center, the DMDC, to help ensure that benefits 
and protections can be applied in the most efficient manner 
possible.
    On industry efforts to improve compliance with the SCRA, 
our members are expanding personnel, adding resources, 
improving communication and training across business lines to 
better serve military customers, for example, one company has 
added an additional 490 personnel focused solely on SCRA and 
military customer assistance.
    Companies have created military advisory committees led by 
senior executives, often with a military background, to 
spearhead efforts to improve service to military customers. A 
joint resource that we have been using to help reach more 
military families is the Hope Now Alliance, which is a 
voluntary industry, non-profit foreclosure prevention effort 
that works closely with Treasury on the Making Home Affordable 
program.
    Hope Now now holds in-person outreach events to contact and 
assist the stressed homeowners on their mortgage problems. Hope 
Now is now holding outreach events for military families on or 
near military bases. Since 2011, Hope Now has conducted nine 
on-base military outreach events. There are two non-base events 
scheduled, one in San Antonio, TX, on August 17, and one in San 
Bernardino, CA, on August 24.
    At these events, Hope Now also seeks to inform 
servicemembers about their SCRA protections. Anecdotally, 
according to exit surveys taken by Hope Now at military events, 
more than 80 percent of the active duty members who 
participated in an event were not aware of their SCRA 
protections. Obviously, those are families that are having 
difficulty.
    At these events, personnel can also learn about their 
mortgage options and receive counseling from independent, non-
profit agencies. At a recent event at Joint Base Lewis-McChord, 
a homeowner said they were very pleased with the outcome. They 
are going to be able to address their mortgage situation, and 
it met and exceeded their expectations.
    Now, I mentioned that there are some weaknesses in the SCRA 
benefits notification process, and one is that military 
personnel often do not notify their financial services of their 
status. We recognize that servicemembers face many other 
challenges in their lives which may cause them not to notify 
their financial services company of their status. They are 
being called up, they are getting briefings on many other 
issues, and sometimes they just do not do it.
    One of our member companies reports that out of their 
military customer base who are date-eligible for SCRA benefits, 
only 31 percent have submitted military orders to them to 
activate their benefits. So, we support alternatives to help 
improve the process for proactively identifying SCRA 
individuals.
    We want to work with Congress and the Department of Defense 
to improve procedures for applying SCRA. As Colonel Kantwill 
mentioned in his discussion with Senator Boozman, in 2011 and 
2012, our members worked with DOD to develop an active duty 
status short form to improve communication of active duty 
orders from servicemembers for their financial services 
company.
    While it is improving, the penetration of the form is not 
as broad as we would like it to be, but it is an example of the 
cooperation between the industry and DOD. The DMDC has become a 
critical tool for the financial services industry to strengthen 
compliance with SCRA. Cooperation between industry and DOD is 
essential to enable DMDC to identify individuals who qualify 
for SCRA protections. We have worked with DOD on improvements 
to the DMDC system and we thank the Department for making these 
changes.
    Additional improvements will be needed, particularly if 
Congress considers adding additional populations, because the 
database will have to be able to provide identification of 
spouses, disabled veterans, or other classes Congress may 
choose to designate.
    In closing, I just want to note another joint effort by the 
Housing Policy Council and the Hope Now Alliance called Project 
Patriotism Homes for Veterans. Attached to my testimony is a 
white paper on industry efforts to transfer REO properties to 
veterans and military families. We believe that thousands of 
these homes will be transferred to deserving veterans and 
families in the coming years, and it is a good example of the 
industry and non-profit cooperation to assist military 
personnel, veterans, and their families.
    Thank you for the opportunity to testify and I look forward 
to working with you and answering any questions.
    [The prepared statement of Mr. Leonard follows:]
     Prepared Statement of Paul M. Leonard, Senior Vice President, 
    Government Affairs, Housing Policy Council, Financial Services 
                               Roundtable
    Chairman Sanders, Ranking Member Burr and Members of the Committee 
thank you for holding this important hearing today focused on the 
unique financial services issues affecting Servicemembers and their 
families. We thank you for the invitation to participate.
    My name is Paul Leonard and I am the Senior Vice President of 
Government Affairs for the Housing Policy Council (HPC) of The 
Financial Services Roundtable (FSR). The Housing Policy Council is part 
of The Financial Services Roundtable and our members are thirty-one of 
the leading national mortgage finance companies in America. HPC members 
originate, service and insure mortgages.
    Since early 2011, the members of the Housing Policy Council and 
members of The Financial Services Roundtable, both individually and 
collectively, have been intensely focused on strengthening their 
ability to comply with the Servicemembers Civil Relief Act (SCRA) and 
in broadening and improving their customer service and support for 
military service personnel, veterans and their families.\1\
---------------------------------------------------------------------------
    \1\ See Project Patriotism Addendum, including the Financial 
Services Roundtable's survey of member companies and the various 
programs, products and services focused to military consumers, as part 
of this testimony.
---------------------------------------------------------------------------
    As part of this focused effort, HPC has worked closely with Colonel 
Paul Kantwill and his team at the Department of Defense (DOD); Mrs. 
Holly Petraeus and her team at the Consumer Financial Protection 
Bureau's (CFPB) Office of Servicemember Affairs; the Congress, and the 
industry to increase understanding of, and find solutions to, the 
unique financial challenges that Servicemembers and military families 
face. I want to thank Colonel Kantwill and Mrs. Petraeus for their 
leadership and for working closely with us on addressing these 
important issues.
    The Housing Policy Council has a Servicemember Affairs working 
group and one of the key goals of this group is to improve compliance 
with the SCRA. My testimony today will focus on three important points 
about industry efforts to improve compliance with SCRA:

    (1) Our members are working diligently to fully comply with all 
elements of SCRA and provide assistance to military customers on their 
financial needs;
    (2) While elements of the statute, most notably the 6% interest 
rate cap, provides that the servicemember must notify their financial 
services company and submit official military orders for liability to 
be imposed, a servicemember's failure to notify does not remove the 
risk to the lender should it foreclose on a property when proper 
notification would have prevented that; and
    (3) As Congress considers whether to expand SCRA to new consumer 
classes such as the spouse of a deceased servicemember killed while on 
active duty, we ask that consideration also be given to improving the 
ability of industry participants to better utilize the Defense Manpower 
Data Center (DMDC) at DOD to supplement the notification process with 
the goal of insuring that benefits and protections are applied to 
protected classes in the most timely and efficient manner possible.
(1) Industry efforts to comply with SCRA:

    FSR and HPC member companies continue to expand their personnel and 
resources dedicated to serving their military customers. Many companies 
continue to hire military veterans, and in some cases their spouses, to 
staff customer service units as well as internal compliance and 
military liaison positions that are trained and certified in SCRA. 
Several of our companies have instituted specific programs and services 
to meet the financial needs of our men and women in uniform as well. 
Company efforts to improve communication, collaboration, compliance and 
training across business lines to better service military customer 
accounts, and to ensure protections such as SCRA have come a long way 
in the last several years. This progress has occurred with the 
leadership and cooperation of the Department of Defense, CFPB, the 
Department of Justice and the commitment of the companies that we work 
with at the Housing Policy Council and The Financial Services 
Roundtable.
    One resource that has been utilized to help reach more military 
customers is the HOPE NOW Alliance, of which HPC is a founding member. 
HOPE NOW is a voluntary industry and non-profit foreclosure prevention 
and home preservation effort that works closely with the Treasury 
Department on the Making Home Affordable programs. HOPE NOW holds in-
person outreach events and other efforts to contact distressed 
homeowners across the country and provide information and assistance to 
them on home retention and other mortgage workout options that are 
available to them.
    HOPE NOW has expanded its outreach model to conduct outreach events 
for military families on and near military bases across the United 
States to the extent the Department of Defense permits it to do so. The 
on-base meetings permit mortgage servicers and non-profit counselors to 
reach more service men and women and educate them on workout options 
available to them in situations such as when their loans are underwater 
or when they face a Permanent Change of Station. In addition, the HOPE 
NOW events also help to improve servicemembers' awareness of their SCRA 
protections. According to exit surveys taken by HOPE NOW at military 
outreach events since 2011, more than 80% of active-duty members of the 
military who participated in a HOPE NOW sponsored event were not aware 
of their protections under SCRA and had not taken any action to 
activate the protections. In other words, for many servicemembers, they 
learned about their SCRA protections for the first time when they sat 
down, face to face with their lender to discuss options on their 
mortgage situation.
    There is a real need to continue efforts to educate military 
personnel about the SCRA protections that are available to them and 
that they understand the process to activate the protections. The HOPE 
NOW Alliance is continuing military outreach events and will be in two 
military markets in August, one in San Antonio Texas on August 17 and a 
second in San Bernardino California on August 24. We want to continue 
and work with all other stakeholders to improve education on SCRA and 
to better serve our men and women in uniform.
(2) Weaknesses in the notification process for SCRA benefits:

    In practice, the process to initiate SCRA benefits and protections 
often fails because the servicemember does not provide notification of 
their active-duty status to their financial services company. The 
industry recognizes that there are a number of challenges that a 
servicemember faces which may prevent timely submission of military 
orders or other documentation to their financial service provider. The 
industry supports exploring alternatives to help improve the process 
for identifying and providing benefits to SCRA eligible individuals.
    We want to work with Congress, the Department of Defense and other 
stakeholders to develop new tools and improve current processes and 
procedures for applying SCRA protections. In 2011 industry, working 
cooperatively with DOD, developed an ``Active Duty Status'' short form 
designed to improve communication of active duty orders from 
servicemembers to their financial services company. The form was 
approved by DOD and implementation began in January 2012. Although the 
use of the form is not yet as broad as we would like, it is an example 
of cooperative work between key stakeholders to improve the SCRA 
notification process and enhance compliance capabilities by the 
industry. We want to expand the use of the ``Active Duty Status'' short 
form and are prepared to work with key stakeholders to improve its use 
as an additional tool for compliance with the law. We are also 
exploring ideas with our member companies through our Servicemember 
Affairs working group to develop new tools to enhance compliance with 
SCRA.
(3) Defense Manpower Data Center Data base (DMDC):

    The Defense Manpower Data Center has become the primary tool used 
by the financial services industry for strengthening compliance with 
SCRA. The use of the DMDC system has been recognized by Federal and 
state regulators such as the OCC and the Department of Justice in 
various agreements as an important tool to enhance compliance with 
SCRA. Since the DMDC was designed for other purposes separate from its 
use as a SCRA verification tool, cooperation between the industry and 
the Department of Defense is essential to enable its effective use in 
identifying servicemembers and other individuals who qualify for SCRA 
protections. We continue to work closely with DOD to suggest 
enhancements and improvements to the DMDC system that have improved the 
efficiency of the database. DMDC has made improvements to the system in 
the last year that our members have welcomed as positive enhancements, 
and we thank the Department of Defense for making those adaptations.
    There remains much to do to improve the system. These improvements 
are especially needed as Congress considers expanding SCRA protections 
to new consumer classes. The database needs additional changes and 
capabilities to enable it to provide identification of spouses, 
disabled veterans or other classes Congress may designate.
    Many of the ongoing data integrity and data accuracy issues are 
documented in a report to Congress titled ``Accuracy of Data in the 
Defense Enrollment Eligibility Reporting System (DEERS),'' \2\ which 
was required by section 595 of the National Defense Authorization Act 
for Fiscal Year 2013. Specific issues that our member companies 
continue to encounter with DMDC include:
---------------------------------------------------------------------------
    \2\ Accuracy of Data in the Defense Enrollment Eligibility 
Reporting System Plan, March 2013, p. 5.

     Unreliable data associated with National Guard and 
Reservists, particularly those individuals with Title 32 orders for 
state duty that transition to Title 10 status for Federal duty. From a 
compliance perspective, it can be challenging to capture date-eligible 
benefits of a servicemember that routinely changes status.
     Use of unique identifiers when retrieving data from DMDC.

         - For example, the system requires both a surname and SSN. 
        This can lead to false negatives (which leads banks, creditors 
        and other users to falsely believe that the person of interest 
        in not a member of the military). This error often occurs when 
        a servicemember has changed his or her last name, such as in 
        the case of marriage, or where the DOD's record of the 
        servicemember's surname differs from other official records. We 
        believe that such errors would be eliminated if the system 
        required only a valid SSN/Tax ID identifier.

    We recognize Congressional interest in expanding SCRA to new 
consumer classes, but we urge that Congress consider enhancing the DMDC 
database system to provide accurate and reliable access to data that 
would enable the timely identification of new categories of individuals 
protected under the law. We invite Members of Congress to work with all 
key stakeholders here today to help improve the data integrity and 
accuracy of the DMDC system and identify the appropriate methods to 
achieve this goal.
    One final note I would like to make in closing today is about a 
joint effort by the Housing Policy Council and the HOPE NOW Alliance on 
what we call our Project Patriotism Homes for Veterans initiative. In 
June of this year HPC issued a white paper on industry efforts to 
transition refurbished Real-Estate Owned or distressed properties to 
veterans, wounded warriors and military families. Our findings indicate 
that over the coming years thousands of these homes will have been 
transferred to deserving patriots and their families. A top 
recommendation from the paper was to convene a ``Homes for Veterans'' 
summit with key stakeholders engaged in this space, which we did last 
week. There are a number of actionable next steps we have taken from 
that summit that we believe can better enhance these Homes for Veterans 
programs, inter-connect stakeholders in this space, and enhance these 
models to a larger, more national scale. This initiative by the 
industry, in partnership with non-profits and third party groups, is a 
great example of ongoing efforts by the financial services industry to 
address the unique needs of the U.S. military and veteran populations.

    I thank the Committee for the opportunity to testify today and look 
forward to working with you to address the unique financial services 
issues affecting servicemembers, veterans and military families.
                                 ______
                                 
Response to Posthearing Questions Submitted by Hon. John D. Rockefeller 
           IV to Paul Leonard, Financial Services Roundtable
    Question 1. There has been significant confusion over time related 
to one very important aspect of the SCRA: whether servicemembers are 
required to notify their lenders in order to be eligible for the 
protections it provides. You mentioned in your testimony that in the 
case of one of your member companies, only 31 percent of eligible 
servicemembers have notified their lender of their eligibility for SCRA 
protections. However, as you probably know, lenders only have to be 
affirmatively notified of a desire for an interest rate reduction--not 
of the entitlement of a servicemember to protection from foreclosure 
while they are on active duty status. That being said, some banks have 
argued in court that servicemembers were not protected from foreclosure 
under the SCRA because they did not provide the bank with notice. What 
is the Financial Services Roundtable's current understanding of the 
obligations of servicemembers to notify their lenders that they are 
protected under this important law?
    Response. For the foreclosure protection, under SCRA law, 
servicemembers are not required to notify their lender. For the 6% 
interest rate cap benefit, servicemembers are required to contact their 
lender. With that said, many of the protections under SCRA, including 
protection from foreclosure, have specific eligibility periods that 
extend beyond the period of a protected individuals active duty end 
date. The only method by which financial services companies can verify 
when a servicemember's protection from foreclosure begins and ends 
under SCRA is through official military orders and/or a positive 
identification of military service through the Defense Manpower Data 
Center (DMDC). Beyond those two means a company is extremely limited in 
their ability to effectively verify and apply protections within the 
legislatively mandated period of time. Furthermore, NSS standards 
created required foreclosure protections above and beyond the SCRA law 
(e.g. deployed internationally to a hazardous duty area) and these 
cases can only be determined by the servicemember submitting official 
orders or military documentation.
                                 ______
                                 
  Response to Posthearing Questions Submitted by Hon. Mark Begich to 
                     Financial Services Roundtable
    Question 5. You mentioned two initiatives, Hope Now events and 
Project Patriotism Homes, what are some other initiatives the industry 
has taken to improve service to military customers?
    Response. Our member companies continue to offer pre-service and 
post-service financial education programs to military customers if they 
wish to utilize them. As mentioned in our testimony, many of our 
companies have expanded their operations to better serve military 
customers including adding single points of contact for the life of 
loans and multiple companies actively participate in programs focused 
on hiring veterans and their spouses.
    As part of Project Patriotism, we conducted a survey of members to 
both the Roundtable and the Housing Policy Council on programs, 
products and services they provide to military customers, veterans and 
military families. More than 1/3rd of our companies participated in the 
survey. Here are some of those results:

     Overall, the vast majority of survey respondents provide 
employment outreach for active military, military families, and 
veterans.
     50% provide job training for veterans.
     50% provide special financial service products for active 
military.
     About 1/3rd of respondents provide financial literacy for 
active military, military families and veterans.
     The majority of respondents provide special programs and 
outreach efforts for active military, military families, or veterans.
     Over 50% of respondents provide special services to help 
active-duty Servicemembers re-acclimate to civilian life.

    Question 6. How does the industry currently utilize DMDC, how 
important is it to compliance, and what other tools exist for purposes 
of SCRA compliance?
    Response. The Defense Manpower Data Center has become the primary 
tool used by the financial services industry for strengthening 
compliance with SCRA. In practice, the process to initiate SCRA 
benefits and protections, particularly the interest rate cap benefit, 
often fails because the servicemember does not provide notification of 
their active-duty status to their financial services company, and the 
data in DMDC is at times inaccurate or inconsistent for the timely 
application of providing foreclosure protections. The industry 
recognizes that there are a number of challenges that a servicemember 
faces which may prevent timely submission of military orders or other 
documentation to their financial services provider. The industry 
supports exploring alternatives to help improve the process for 
identifying and providing benefits and protections to SCRA eligible 
individuals. For example:

     We worked closely with DOD to create a new tool for 
compliance in the Active Duty Status short form. The form was designed 
to improve communication of active duty orders from servicemembers to 
their financial services company.
     Through the FSR-HPC Servicemember Affairs working group we 
are actively exploring new ideas to improve industry compliance and 
welcome all stakeholders and their ideas on this initiative.

    Generally speaking, member servicers have implemented significant 
controls to ensure that all customers are evaluated for SCRA protection 
throughout the default servicing lifecycle. For example, many member 
servicers are checking the DMDC prior to referring a customer to 
foreclosure, checking again prior to default judgment, checking again 
prior to foreclosure sale, checking immediately after the foreclosure 
sale, and checking again prior to eviction. These proactive efforts to 
check customers with known and unknown military status have greatly 
improved the servicers' ability to detect qualifying individuals and 
apply the protections afforded under the Act.
                                 ______
                                 
Response to Posthearing Questions Submitted by Hon. Richard Blumenthal 
                    to Financial Services Roundtable
    Question 2. Mr. Leonard, thank you for your tireless work on behalf 
of our country's veterans, servicemembers, and their families. Can you 
elaborate on the harm that you have seen caused by the long-term 
financial products not covered under the Military Lending Act? I've 
called upon the Department of Defense to update their guidelines for 
this act to cover predatory lenders who use open-ended products to 
charge high APRs to veterans-some as high as 400%. Could you talk about 
any cases you have seen of the harm that high APRs--such as the open-
ended products offered to servicemembers at APRs as high as 400%--can 
cause to servicemembers?
    Response. As our testimony notes, the Housing Policy Council has 
primarily focused on improving industry compliance with the 
Servicemembers Civil Relief Act (SCRA). We have not focused on the 
Military Lending Act. We do believe that it is beneficial for military 
personnel and the financial services industry to improve and strengthen 
financial education for servicemembers at all phases of their career 
since financial education plays a critical role in helping 
servicemembers and their families use credit products wisely.
                                 ______
                                 
  Response to Posthearing Questions Submitted by Hon. Mazie Hirono to 
                     Financial Services Roundtable
    Question 3. After implementing the suggestions you listed, do you 
think the Defense Manpower Data Center (DMDC) system is at the point 
where there should be no more incidents of SCRA violations?
    Response. We believe that the enhancements by DOD to DMDC have 
improved the system, including the ability to process batches of 
accounts through the system to verify military service of a company's 
portfolio of customers. The industry has improved their compliance 
capabilities with SCRA, as was noted in the testimony of Mrs. Petreaus 
of CFPB and Colonel Kantwill of DOD at the hearing on July 31. As our 
testimony notes, we continue to experience a severe gap in submission 
of a written notice and official military orders to companies in 
activating the 6% interest rate cap benefit. If the DMDC data was 
inclusive for all servicemembers, (e.g. full time military, reserve, 
guardsmen, early alert notification, servicemembers on classified 
orders etc.); and also was accurate and timely, the industry could 
greatly improve compliance with the SCRA's foreclosure protection 
component. Furthermore, if the industry could utilize data from the 
DMDC to activate the 6% interest rate cap benefit, this would greatly 
improve the process and servicemembers' experience (servicemembers 
would not need to submit orders). With these enhancements and some 
level of statutory protection or safe harbor for those financial 
services companies that utilize and rely on the DMDC to provide SCRA 
benefits and protections to servicemembers, the industry would be able 
to further improve compliance. The ongoing data integrity issues 
related to DMDC, however, prevents full compliance with the law. 
Questions remain as to whether active-duty personnel are even familiar 
with SCRA, the protections they are entitled to, and how to activate 
these protections. There remain a number of challenges that need to be 
addressed to better enhance the industry's ability to comply with SCRA, 
including improving education to servicemembers on their rights and 
protections under the law.

    Question 4. Your testimony indicates that the DMDC is still being 
improved. Are further changes necessary to run an accurate search 
engine that provides current records of individuals' active-duty/
deployment periods?
    Response. Yes, we do believe additional changes can and should be 
made to improve the system and the ability to retrieve data from DMDC. 
For example, as mentioned in our testimony, the ability to search the 
system utilizing a social security number as the primary search field 
would reduce false-negatives from the database. Because data is 
manually input by DOD and the military services, and queries through 
the system are driven through multiple fields such as the last name, 
the odds of a false-negative are high. Indications are that DOD is 
working to automate many internal processes to improve data accuracy 
and the ability to retrieve such data more rapidly; however, it is 
unclear where that process stands. Additionally, as Congress considers 
expanding SCRA to new consumer classes such as the surviving spouse to 
a deceased active-duty servicemember, access to the appropriate data 
from DMDC would provide an additional verification tool for the 
purposes of compliance with any new requirements under the law.

    Chairman Sanders. Thank you very much, Mr. Leonard. Mr. 
Leonard, let me begin by asking you this. In a 2012 report, the 
Government Accountability Office identified over 14,000 
instances of financial institutions failing to properly reduce 
servicemembers' mortgage interest rates and over 300 improper 
foreclosures. How did this happen?
    Mr. Leonard. Senator, as was documented by the previous 
witnesses, there were shortcomings across the industry, I 
think, throughout the crisis from 2007. Now we are coming out 
of it, but I think many financial service companies were 
overwhelmed by the number of consumers in distress. I think 
there were--I do think that companies did not have integrated 
systems to identify military personnel promptly.
    As I said, oftentimes the covered individuals do not 
identify proactively, so the companies need to do it. That is 
one reason since 2011 we have been working with DOD on making 
the DMDC more useful in proactively identifying, so we do not 
have to rely on--put the burden on the servicemember.
    Chairman Sanders. Do you anticipate that there will be a 
reduction in these types of occurrences?
    Mr. Leonard. I think there already has been a reduction. If 
you look at the agreements, I think since companies--these 
problems were called to their attention beginning in 2010, 
2011. As I said, our member companies have dedicated tremendous 
amounts of resources, hired new staff often with a military 
background, and also integrated product lines so that they know 
if there is an SCRA issue in mortgage. They are going to find 
out if that also applies to credit cards or auto loans. So, I 
think there has been a dramatic improvement and effort over the 
last several years.
    Chairman Sanders. So, what I am hearing you say is you do 
not anticipate the kind of problems that we have seen in the 
past?
    Mr. Leonard. I can tell you that our companies, the major 
national and regional companies, are very focused on this 
issue. They are doing everything they can to make sure that 
mistakes or problems do not occur again.
    Chairman Sanders. I am glad to hear that.
    Senator Boozman.
    Senator Boozman. Thank you, Mr. Chairman. I think one of 
the ways that we can do that, Mr. Chairman, is to make it such 
that--the statistic you gave--that 80 percent essentially are 
not aware of their rights with the law. Am I correct?
    Mr. Leonard. Yes. And that was----
    Senator Boozman. That you surveyed. And that is not an 
official survey perhaps, or whatever, but a pretty good 
indicator that there is a problem. But I think as we do a 
better job in telling our servicemembers--and I think 
particularly our commanding officers because that is where you 
go to when you are having a problem--making sure that they 
understand and that there is, you know, how you go about doing 
that, I think, is really important and really will be our best 
bet for eliminating problems in the future or, you know, 
dealing with these companies that are being unscrupulous.
    Tell me about the short form and the long form. Now, the 
long form, does the short form replace that?
    Mr. Leonard. The short form is intended to replace--you 
know, as you know, orders are many pages and very detailed.
    Senator Boozman. Right.
    Mr. Leonard. But the key thing to initiate benefits is the 
dates of active duty service. So, the short form has the key 
information that the financial service company needs to 
initiate benefits and make sure that they are applied when the 
servicemember is entitled to it. So, the short form is one 
method to try to speed up the process so there is no gap in 
that servicemember getting their benefits.
    The other method we would like to see is--what our 
companies do is they go to the Defense Manpower Data Center, 
they run their customer base against the database, and find out 
who is on active duty. Now, we recognize that there are--DMDC 
is used for a variety of other purposes by the Department. It 
is not just for identifying SCRA benefits, but that has become 
a very important role for it.
    So, we would like to work with the Department and the 
Congress to make additional improvements. For example, in a 
secure manner, using a Social Security number to identify the 
covered individual, because often the names can be slightly 
different. If it is a maiden name or hyphenated name, it may 
come back as a false negative.
    The major companies, the national companies, we are talking 
about tens of thousands of files that they need to check 
against the database. But as you said, we think the Department, 
with the help of CFPB, is very focused on the financial 
education part of it. Our members are focused on it, both 
individually through outreach, and the addendum to our 
testimony talks about some of the individual efforts companies 
have made on financial education with their military customers.
    Senator Boozman. Can you follow up on that? Because, I 
guess, my final question would be, you know, people are working 
very, very hard on this issue and we have got a good law in 
place. What else do we need to do? Can you give some examples 
of what--you know, you said--give some examples there and then 
again, where else do we need to focus?
    Mr. Leonard. I think what we are seeing is that the efforts 
that the Department has underway with the advice of CFPB on 
financial education, as you noted, it is very important to have 
the buy-in of the commanding officer, that he or she identifies 
it as a priority. For example, at the recent outreach event 
that Hope Now had at Joint Base Lewis-McChord in Washington, 
the CO said, ``This is something we should do. We should have 
this event so that both military and base civilian personnel 
and veterans could come in and talk with either a non-profit 
counselor or their financial services provider.''
    I think our companies and the industry in general is 
getting more focused on it and I think some of the material we 
provided in the testimony shows that there is an increased 
attention, that this is a unique consumer segment. As Chairman 
Sanders said at the beginning of the hearing, they have got a 
lot going on in their lives, even much--you know, other 
families have a lot of stresses, but military families have 
probably the most stress.
    So, that is one reason why we think enabling companies in a 
secure manner to use the database more effectively, to say, OK, 
we have identified this person, they should be getting the 
coverage from the State.
    Senator Boozman. OK. Thank you, Mr. Chairman.
    Chairman Sanders. John, if I could, I would like to ask 
another question. I understand that the financial industry is 
involved in an initiative, Project Patriotism Homes for 
Veterans. Homelessness among veterans has been a very serious 
problem in this country for decades. I think in recent years, 
we have begun to maybe make a little bit of progress in that 
area. Can you explain to us what the financial industry intends 
to do to help the VA and all of us address the problem of 
veterans' homelessness?
    Mr. Leonard. Well, Mr. Chairman, this particular effort is 
focused on--as you know, one of the effects of the financial 
crisis was that there was an increasing amount of distressed 
properties that were foreclosed on. Many of them were vacant 
and in disrepair. And a number of our companies and non-profits 
started asking, ``Well, could we use some of these REO 
properties to provide homes for veterans and military 
personnel?''
    So, companies individually began working with non-profits 
to figure out how could they identify potential REO properties 
that could be transferred to the non-profit and the non-profit 
could identify veterans and servicemembers who would be able to 
take over the home, either in a straight donation, some type of 
sweat equity, or a reduced mortgage?
    And that is what the Project Patriotism paper is about. It 
is to document the different efforts that are underway.
    Chairman Sanders. What kind of numbers are we talking 
about? How many homes have been transferred?
    Mr. Leonard. In the last year, I think there were 500 
homes, but we expect that to climb into the thousands. The 
problem is, is that there are a number of factors involved. You 
have to find a home in an area where a veteran wants to live.
    Chairman Sanders. I do understand the complexity of it, but 
at this point, you are saying there were about 500 vacant homes 
and now they are occupied by veterans and their families?
    Mr. Leonard. Yes.
    Chairman Sanders. And you expect that number to continue?
    Mr. Leonard. Yes, and we can provide the Committee with an 
update on the number.
    Chairman Sanders. I would love to see that. And is this 
project taking place across the country?
    Mr. Leonard. Yes. Most of our members and major national 
lenders are involved and they work with different non-profits. 
In the paper, it documents the types of non-profits. Each of 
the non-profits may have a slightly different approach, either 
straight donation or sweat equity.
    Chairman Sanders. So, it is going from the bank to the non-
profit to the veteran?
    Mr. Leonard. Exactly. The bank provides the property and 
some of the funding, but the selection of the veteran and 
working with them to make sure that they can be a successful 
homeowner is done through the non-profit so that they 
understand specifics: does the veteran need to be near medical 
facilities; are they going to be near family; and that type of 
thing.
    Chairman Sanders. Please get as much information on that 
effort as you can to my staff. I would be appreciative.

    [This information was received and is being held in 
Committee files.]

    Senator Boozman.
    Senator Boozman. Thank you, Mr. Chairman. Again, we 
appreciate your efforts and we really look forward to working 
with you. Hopefully you can help us strengthen things; then, as 
importantly, help us in providing the outreach.
    I think that is really what we lack more than anything, is 
just making the servicemember aware of the significant 
protections that they have. And right now, that seems to be a 
challenge which is just going to take everyone working together 
to do a better job on that. So, thank you for being here.
    Mr. Leonard. Thank you, Senator. Thank you, Mr. Chairman.
    Chairman Sanders. Mr. Leonard, thank you very much. With 
that, this hearing is adjourned.
    [Whereupon, at 10:48 a.m., the hearing was adjourned.]
  

                                  
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