Time to Protect Military Families from Illegal Repossessions

Businesses are seizing service members’ property, with impunity.

As it gets to work on its annual defense policy bill, Congress should seize the opportunity this month to correct an injustice that befalls thousands of American military families every year: illegal repossessions and foreclosures during a loved one’s time in uniform.

It’s hard to believe such things still happen more than 150 years after Congress passed the Civil War-era Servicemembers Civil Relief Act (SCRA), which protects military families from financial disruptions during a deployment, but thousands of families still suffer illegal property seizures each year.

In fact, more than 15,000 violations of SCRA by financial institutions were reported in 2012, according to the Government Accountability Office.

Among other protections, SCRA allows a deployed service member to terminate a real estate or car lease when his military orders require him to do so and prohibits repossessions or foreclosures without a court order. Most employers and businesses respect those protections. But some do not. And increasingly, companies are getting away with the violations, thanks to a legal loophole that effectively denies families legal recourse.

That loophole, known as forced arbitration, enables employers and businesses to keep the injured family out of court.

In one widely reported case, an Army National Guard sergeant named Charles Beard learned while serving in Iraq that his family car had been repossessed from his California home, illegally. The lender, Santander Consumer, had threatened his wife with imprisonment if she resisted. The company was ultimately found to have broken the law, but that was little consolation to Sergeant and Mrs. Beard, who, despite spending four years fighting the action, received neither the car nor any compensation for its wrongful repossession.

An unread forced-arbitration clause buried in the contract made it impossible for the Beards to obtain justice.

Wait a minute. Don’t consumers have the right to just say no to such clauses? Not really. Thanks to a 90-year-old federal law called the Federal Arbitration Act, as interpreted by some recent Supreme Court decisions, U.S. courts hold these fine-print clauses sacrosanct, which has caused them to become ubiquitous. They’re everywhere these days—even in those annoying “terms and conditions” pop-ups that everybody accepts but nobody actually reads, not even, one assumes, federal judges. As a result, consumers can’t easily “take their business elsewhere.” This has made it well-nigh impossible for people to reject or avoid the clauses.

The result is justice denied on a grand scale.

To be sure, arbitration can be a great option after a dispute has arisen. But to make it binding beforehand is problematic, for at least three reasons: 1) Arbitrators are usually selected and paid for by the company, so their judgments often, unsurprisingly, favor the company. 2) Arbitrations are private, so they don’t have to follow the traditional rules of law or of due process. And 3) arbitrators’ reasons for a decision aren’t published, so their decisions don’t serve as binding precedents for future, similar cases.

Basically, every private arbitration is its own, private crap shoot.

A movement has arisen to address the forced-arbitration problem.

A proposed SCRA Rights Protection Act (bill numbers H.R.4161 and S.2331) has been introduced in both the House and Senate. Authored by Republican Representative Walter Jones of North Carolina and a bipartisan pair of Senators (Democrat Jack Reed of Rhode Island and Republican Lindsey Graham of South Carolina), the bill has a number of cosponsors, including two Iraq veterans: Rep. Doug Collins, Republican of Georgia, and Rep. Tulsi Gabbard, Democrat of Hawaii.

Under the bill, third-party arbitrations involving service members would have to be voluntary. They could only be binding when all parties to a controversy have consented to it in writing after it arises.

If the bill had been law when Sergeant Beard’s car was seized, his family would have been able to obtain compensation for the wrongful repossession.

The possibility of losing in court would deter most companies from running roughshod over service members’ rights.

The bill won’t cost taxpayers a cent, but it will enhance personnel readiness and the national defense. That’s why the Department of Defense and numerous national military and veterans groups, including the six-million-member Military Coalition (TMC), support the bill’s inclusion in this year’s annual defense authorization bill, commonly known as NDAA.

What better way to help our brave men and women serving abroad than to protect them from financial victimization at home?

The SCRA Rights Protection Act is a no-brainer. Congress should enact it now.

Dean Clancy, a former White House and congressional aide, writes on U.S. health care, budget, and constitutional issues. Follow him at deanclancy.com or on twitter @deanclancy.

 

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