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The Servicemembers Civil Relief Act (SCRA) was passed by Congress in order to grant certain legal protection for members of the military. However, Corporate America and its front groups have found a loophole in the SCRA that allows them to violate the act without being held accountable—forced arbitration. This puts U.S. Armed Services’ brave men and women, who protect our country and should not have to worry about financial frauds and schemes back home, in jeopardy.
Forced arbitration is a private system used by companies for resolving complaints that bypasses courtroom rules of evidence. Companies sometimes choose the arbiters, and the results, which are not appealable, are often never disclosed to the public. Many Americans who are under a contract with investment advisers or lenders are obligated to resolve their disputes in this way. Unfortunately, troops deployed abroad are subject to this same experience, even though, according to military lawyers, state authorities, and the Pentagon officials, they are not supposed to be.
Throughout the years dating back to the Civil War, Congress has established many protections for service members from repossessions and foreclosures. However, the repeated use of mandatory arbitration by the financial industry, which includes numerous banks that promote their work for veterans, violates the federal protections and makes troops and their families vulnerable to predatory lending. Col. John S. Odom Jr., who was once an Air Force lawyer and now has a private practice in Shreveport, LA, said, “Mandatory arbitration threatens to take these laws and basically tear them up.” High-ranking officials of the Defense Department concur, advising Congress that “service members should maintain full legal recourse.”
Although a bipartisan bill was proposed last year that would have given service members the opportunity to opt out of arbitration and file a lawsuit, it was opposed by the U.S. Chamber of Commerce and the Securities Industry and Financial Markets Association—Wall Street’s major trade group—and never made it out of committee. Many companies and banks contest that handling disputes using arbitration makes the process more efficient and less costly than court. However, military lawyers say that these cases can take years to resolve. Moreover, mandatory arbitration clauses prevent consumers from banding together in a broad legal challenge and instead, allow companies to battle claims one by one. This lets few consumers take on companies at all. The bill will be introduced again this year by Senator Lindsey Graham, Republican of South Carolina.
