Money & Company

Tracking the market and economic trends
that shape your finances.

« Previous Post | Money & Company Home | Next Post »

New consumer bureau warns banks not to foreclose on active-duty military

February 1, 2011 |  2:05 pm

Hollypetraeus The new Consumer Financial Protection Bureau on Tuesday warned banks not to violate laws that protect active-duty military personnel from home foreclosures and high interest rates.

The move comes after news reports of apparent violations by JPMorgan Chase and Deutsche Bank of the Servicemembers Civil Relief Act, a 2003 law that protects military families.

In letters to the chief executives of the 25 largest banks that provide mortgage servicing, Holly Petraeus, the head of the still-forming bureau's Office of Servicemember Affairs, urged them to educate their employees about the law and take other "proactive steps."

"The SCRA provides important protections for our military families who do so much for our country,"  Petraeus wrote. "I know that you appreciate the importance of these SCRA protections, and I appreciate your assistance in ensuring that your bank does not overlook its obligations –- legal and otherwise –- to your military customers."

Following an NBC News report, JPMorgan Chase said last month that it had "made mistakes" and was refunding about $2 million in overcharges to military families. The New York Times last week reported an apparent violation involving Deutsche Bank.

Some members of Congress have called for investigations into violations of the law, which prohibits banks from charging more than 6% interest on the debts of active-duty service members and foreclosure proceedings. 

Petraeus, the wife of Army Gen. David H. Petraeus, the top U.S. commander in Afghanistan, was appointed last month to the implementation team setting up the consumer bureau. The longtime advocate for military families was tapped by Elizabeth Warren, an advisor to President Obama and Treasury Secretary Timothy F. Geithner who is setting up the bureau.

The bureau, created by the financial overhaul law, was designed to protect consumers in the financial marketplace and will begin full operations in July.

-- Jim Puzzanghera

Photo: Elizabeth Warren (left) and Holly Petraeus. Credit: Bloomberg.