Mortgage servicer Village Capital & Investment LLC will pay more than $500,000 to settle Department of Justice (DOJ) claims that it mishandled interest rate protections and retaliated against active-duty borrowers in violation of the Servicemembers Civil Relief Act (SCRA).
The DOJ’s Civil Rights Division and the U.S. Attorney’s Office for the District of Nevada allege that, between March 1, 2020, and the effective date of the settlement agreement, Village Capital failed to properly apply the SCRA’s 6% interest rate cap and retaliated against borrowers who requested statutory protections.
Village Capital did not immediately reply to HousingWire’s request for comment. Under the settlement agreement, the company does not admit liability.
According to the settlement agreement released Monday, Village Capital refused to reduce interest rates to 6% on at least 41 servicemembers’ mortgages as required by the law. The government alleged the company failed to make the rate reductions retroactive to the date borrowers received military orders and did not lower monthly payments to reflect forgiven interest.
The DOJ further alleged that Village Capital used servicemembers’ requests for SCRA benefits to accelerate principal payments on their loans and falsely reported to the Department of Veterans Affairs (VA) that some borrowers receiving rate reductions were delinquent.
In addition, the DOJ said Village Capital misrepresented interest rates in form letters, falsely telling borrowers their interest rate was already below the 6% cap when it was actually higher.
“When lenders refuse to honor the benefits guaranteed under the Servicemembers Civil Relief Act — or worse, retaliate against those who assert their rights — they not only violate federal law, but undermine the trust that military families place in financial institutions,” Harmeet K. Dhillon, assistant attorney general for the DOJ’s Civil Rights Division, said in a statement.
The SCRA caps interest on pre-service debts at 6% during military service and, for mortgages, extends the cap for one year after service concludes. It also prohibits retaliation against servicemembers who invoke their statutory rights.
Under the agreement, Village Capital will pay at least $425,000 to compensate affected servicemembers for overcharges and other harm, alongside a $79,380 civil penalty — the maximum allowable under the SCRA for a first violation.
Within 30 days of the settlement’s effective date, the company must submit revised SCRA policies and procedures to the DOJ. The revised procedures must allow borrowers to submit interest rate reduction requests by fax, mail, private carrier, email or an online customer service portal.
Village Capital must also designate customer service representatives specifically trained in SCRA compliance to handle borrower requests and complaints.
