SCRA Risks

Has your business organization recently evaluated its ability to manage repeated activations, deactivations, and changing Servicemembers Civil Relief Act (SCRA) eligibility periods?

Business organizations spend years building SCRA compliance programs to find eligible servicemembers and deliver the benefits and protections they've earned. However, when military activations surge, the added operational pressure can expose weak spots, even in seemingly solid programs.

The biggest SCRA risks usually aren't about spotting a servicemember in the first place. They show up later, in managing the lifecycle of military service. Think about it: members of the National Guard and Reserve can move between civilian and active-duty status many times over a career, and every one of those transitions adds another layer of complexity for lenders, servicers, leasing companies, towing operators, and other businesses that interact with servicemembers throughout the customer lifecycle.

As activation levels climb, it's worth asking whether your SCRA program can actually handle:

• Accurate identification of newly activated servicemembers

• Timely updates to benefit eligibility periods

• Monitoring of servicemembers transitioning on and off active duty

• Repeated activations and extensions of military service

• Controls surrounding collections, repossessions, foreclosures, and credit reporting activities

• Third-party vendor compliance with SCRA requirements

A lot of compliance failures trace back to the same root cause: a static process that checks military status only once. But SCRA compliance isn't a one-and-done event. It takes ongoing monitoring and real operational controls across the entire customer lifecycle.

Defense Manpower Data Center (DMDC) verification is one area worth inspecting. Ask yourself: How often are military status checks occurring? Are automated interfaces functioning as intended? What controls exist to identify failed queries, stale data, or missed status changes? And how tightly are you controlling the high-risk areas, things like repossessions, foreclosures, and litigation?

It's also worth checking whether your complaint management, issue management, and quality assurance programs can identify emerging SCRA risks early, before they turn into customer harm or land on a regulator's desk.

The financial and regulatory fallout from SCRA violations can be serious. But often, the biggest risk is reputational. When mistakes hurt servicemembers and their families, scrutiny comes quickly, from regulators, military support organizations, consumer advocates, and the media alike.

Here's the upside: a surge in activations is actually a great chance to step back and evaluate your SCRA compliance framework, strengthen operational controls, and ensure systems and processes are doing what they're supposed to.

The organizations that act on this now will be in a far better position down the road, better able to protect servicemembers, lower their regulatory risk, and steer clear of costly remediations.

As military activations increase, now is the time to evaluate whether your SCRA program can withstand the operational demands that follow.

Joseph Sequeira, CPA                                                                      Christopher Tucci

Superius Partners                                                                            Tucci Law, PLLC

Managing Principal                                                                           Principal & Managing Partner                                 

Former Financial Services Risk Executive                     Former Financial Services General Counsel

U.S. Air Force Veteran

This article is provided for informational purposes only and does not constitute legal advice.