Veterans without Legal Protection Forced into Financial Frauds, Schemes

Veterans without Legal Protection Forced into Financial Frauds, Schemes | Pintas & Mullins Law Firm

American military service members face a multitude of hurdles when they return home from duty: PTSD, acclimation back to daily life, familial issues, and finding adequate work, to name just a few. Lesser known are the financial struggles, often ending in illegal repossessions and seizures of assets. The injury attorneys at Pintas & Mullins Law Firm detail how our laws and court systems are failing to protect our veterans from financial fraud.

This story came to our attention through an expose in the New York Times, which focused on the Servicemembers Civil Relief Act (SCRA) and how it is being violated by Corporate America. Since the Civil War, Congress has given service members various protections from repossessions and foreclosures while on active duty. In recent years the American financial industry has been illegally resisted these special protections, leaving troops and their families vulnerable to asset seizures and financial schemes.

Specifically, Corporate America – including big banks that promote the “assistance” they give to veterans – is forcing veterans into mandatory arbitration when they complain of illegal seizing. Mandatory arbitration rules are very common in financial agreements with banks and credit card companies, but service members, under the SCRA, are supposed to be protected from these private agreements.

What is Mandatory Arbitration?

Mandatory arbitration is a system of resolving legal disputes outside courtrooms. Arbitration occurs before a private lawyer (or ‘arbiter’) instead of judges, and arbiters are often chosen by the banks and companies. The arbiter’s decisions are never made public and are always is final. Consumers enter into these agreements when they sign contracts for services, before any dispute or disagreement occurs.

Tens of millions of Americans are currently signed into mandatory arbitration agreements whether they know it or not. It is most common with credit card companies, investment advisers, banks and lenders. As mentioned, service members are supposed to have special protections from these contracts, but companies like JPMorgan Chase and the USAA are finding ways around it.

Arbitration is designed in the interest of the company, most notably because they prevent class-action lawsuits, which allow consumers harmed in similar ways to band together to file a claim. Instead, consumers have to go up against the company one by one, which few people can afford. So instead of filing broad legal challenges against illegal or unethical practices, companies are able to erase the issues entirely.

Real Harm to Real Veterans

This is severely affecting American veterans and their families. Charles Beard, an Army National Guard sergeant, for example, had his car repossessed while he was on duty in Iraq. Men came to his home in California and threatened to put his wife in jail unless she gave them the keys to their car; despite federal laws that require court orders before repossessing the vehicles of active troops.

When he returned home, Sergeant Beard attempted to take the issue to court, but his suit against the auto lender was thrown out because of the mandatory arbitration clause in his contract. This type of forced arbitration directly violates federal protection laws. It took Sergeant Bard four years to get an arbiter to rule on his case, a not-uncommon time frame for arbitration.

Any actions to stop these violations are being actively lobbied against, however. In 2013 a bill supported by both Democrats and Republicans was introduced that would allow service member to opt out of arbitration and file a lawsuit. The bill was opposed by the U.S. Chamber of Commerce and Wall Street’s lobbying group, the Securities Industry and Financial Markets Association (Sifma). The bill never made it to the floor.

The financial industry lobbied against the bill because it fears that exempting service members from arbitration would make it easier for others to gain exemption. The thinking goes, if they admit that mandatory arbitration is bad for the military, than the public would assume it was bad for them as well and challenge the entire system.

Sifma represents many financial companies that publically applaud themselves for their hiring of veterans, including the USAA, which almost entirely serves troops and their families. Sifma and other corporations claim that arbitration is less costly and more efficient than lawsuits, which they contend makes their services more affordable to consumers. There is little data to prove this, and much flat-out denying this causation. 

As mentioned, the SCRA law protects active duty military members and their families from repossession and foreclosure, unless a court order is issued. It also requires lenders to lessen loan interest rates to 6%, yet these laws are rarely followed in truth. The Government Accountability Office finds thousands of violations every year, and in January 2014, a lender had to pay a $9.35 million fine for illegally seizing cars from active service members.

Skirting around the law is one thing; doing it to actively exploit and harm military members is quite another. Sergeant Beard told the New York Times that these SCRA violations will destroy soldiers fighting for our country overseas by rendering them unable to protect their loved ones. The financial industry seems to think this is merely the cost of doing business.

The team of injury attorneys at Pintas & Mullins Law Firm has been working with veterans and their families for over 30 years. We handle cases of catastrophic injury of all types, and offer our services free of charge unless we win you a settlement or verdict. Our legal consultations are completely free and available to potential clients nationwide.