A whistleblower recently filed a defamation lawsuit against the United Services Automobile Association (USAA), specifically its indirect wholly owned subsidiary, USAA Federal Savings Bank (USAA Bank). The case, which a judge in Florida dismissed, revealed that the USAA had about 400,000 violations of the Military Lending Act (MLA).
A former USAA director of compliance, Lenn Ferrer, stated in 2022 that senior executives at the company disregarded warnings from third-party consultants and compliance staff for years. These executives purposely ignored notices of violations of federal banking legislation and regulatory authorities. The USAA hid its illegal practices, including violations of the Servicemembers Civil Relief Act (SCRA) and MLA, as well as other consumer lending laws.
Ferrer said that he has been all about the right thing and telling the truth from the start. Since Compliance Week released its investigative series in 2022, other third-party contractors and USAA risk and compliance insiders shared their own experiences with the company. These people were fired from the company days or weeks after reporting the violations internally.
USAA didn’t challenge the court record’s contents. The company’s public relations director, Roger Wildermuth, said “The case was dismissed on legal grounds, so we did not address the allegations in the complaint.”
USAA’s violations aren’t unique. Numerous financial institutions have paid billions in fines and penalties because they failed to comply with the law. Reporting these violations is vital because they disrespect veterans’ and service members’ rights.
The most relevant SCRA protection that concerns USAA is the interest rate limit for active duty service members. The SCRA mandates that all pre-service debt interest rates be lowered to a maximum of 6%.
Instances like this highlight the importance of providing evidence of one’s military status. SCRACVS can help verify one’s active duty status in as fast as one business day to ensure the compliance of lending institutions. Click here to sign up at SCRAVS and verify the active duty status.