It was an eventful morning on Feb. 9 for a senior executive of JPMorgan Chase, the giant financial institution accused of violating lending rules that - in several cases - caused military families to lose their homes. Stephanie Mudick, Chase's vice president in charge of consumer practices, sat alone as members of the House Veterans' Affairs Committee grilled her about the company's handling of mortgage loan provisions in the Servicemembers Civil Relief Act (SCRA).
The committee's ranking minority member, Rep. Bob Filner, D-Calif., challenged Mudick and fellow JPMorgan Chase employees in absentia to take personal - not corporate - responsibility for violations that reportedly caused emotional and financial distress for a number of servicemembers and their families.
Mudick answered emotionally charged accusations with a "personal assurance" that the institution never intentionally harmed servicemembers in efforts to collect its mortgage payments.
Last month, The American Legion called upon all U.S. financial institutions that handle mortgages for military families to make sure they are complying with provision of the SCRA.
"This is a sad situation, to discover that any bank may be violating a law intended to ease the pressure of financial concerns while people are serving in uniform," said Jimmie Foster, the Legion's national commander.
Under terms of the SCRA, provisions are made to cap interest rates on home mortgages for active-duty military personnel. In a lawsuit filed on behalf of Jonathon Rowles and his wife, Julia, JPMorgan Chase is accused of continuing to charge the couple mortgage rates that exceeded the cap after Rowles joined the U.S. Marine Corps Reserve and was called to active duty.
Chase is also accused of repeatedly misplacing documents that proved Rowles was on active duty, and of making collection calls the couple considered "harassing." Both Rowles, now a Marine Corps captain, and his wife testified at the hearing. So did their attorney, Richard "Dick" Harpootlian, known to the public as Fox News Channel's legal expert.
Harpootlian said the original lawsuit has now been expanded to class-action status and includes those who "received a blighted credit report as the result of their invocation of SCRA protection, those whose homes were foreclosed upon despite SCRA protection, and those possessing installment contracts that were cancelled or resulted in repossession of personal property, such as automobiles, despite SCRA protection."
At the hearing, Harpootlian suggested jail sentences as appropriate punishment for SCRA violators.
In her oral testimony before the HVAC, Mudick said JPMorgan Chase assumed "full responsibility" for the SCRA violations, characterizing the alleged 4,500 cases of mishandled interest rates and 18 wrongful foreclosures as products of human error. She said lack of internal training left many Chase employees with little, if any, knowledge of SCRA regulations and the intricacies of military documentation, saying that "military orders are sometimes hard to comprehend."
In response, Rep. Tim Walz, D-Minn., produced his iPad, upon which he exhibited a simple one-page set of military orders. In contrast, he held up a Chase credit card agreement spanning dozens of pages. He called Mudick's statement "the weakest testimony I've ever heard in this committee."
Nevertheless, in both written and oral testimony, Mudick assured committee members that many "enhanced controls" were now in place at Chase to compensate victims of the SCRA violations and to prevent future occurrences. Among those, she said, was an SCRA telephone "help line" staffed by veterans.
Although Mudick's appearance elicited the most dramatic moments of the two-and-a-half hour hearing, other panelists spoke as well. Among them was U.S. Army Col. Shawn Shumake from DoD's Office of Legal Policy. He outlined the legal structure and history of the SCRA, and how military attorneys are trained to deal with violations of the act. Shumake emphasized, as did committee members, the importance of servicemembers familiarizing themselves with the SCRA's provisions.
Hollister Petraeus, head of the Treasury Department's new Office of Servicemember Affairs, also testified at the hearing.
"Protecting our servicemembers from suffering devastating financial repercussions for answering the call to service is not only the right thing to do - it is also important to our national security," Petraeus said. "A recent Department of Defense survey found that servicemembers consider their finances to be the second-largest source of stress in their lives, behind career concerns but ahead of deployments, health, family - and war."
Petraeus was dismayed to learn about the recent allegations of mortgage-related violations of SCRA. "I hope that the recent attention to this issue will cause all lenders to take steps to educate their employees about the financial protections that the SCRA provides, and to take appropriate proactive steps to ensure compliance," she said.
Committee Chair Jeff Miller, R-Fla., summed up the proceedings. "Our nation's war fighters and their families should not have to fight to keep their piece of the American Dream, while they are on foreign ground defending that fundamental right for all of us," he said. "While I am heartened that JPMorgan Chase Bank is attempting to fix these errors with respect to wrongful foreclosures, and is refunding over $2.4 million in excessive interest charges, more must be done to ensure that this never happens again. I hope this is a wake-up call for the entire financial services industry."
The JPMorgan Chase case is still in litigation, but is entering a mediation phase.