The regulations shaping fintech for veterans

Veterans and active servicemembers have their rights enshrined in an intricate web of laws and rulings. These protections help avoid deployment turning into a financial headache, and can potentially offer a cushion for veterans who have recently left the military. At the same time, the intricacies found within these regulations can be a major compliance concern for military- and veteran-focused fintechs—and still leave significant gaps to fill:

Servicemembers Civil Relief Act

The Servicemembers Civil Relief Act (SCRA) offers a series of protections for active servicemembers and recent veterans. Among other rights enshrined in the Act, active servicemembers are entitled to: a maximum of a 6% interest rate on pre-service loans, protections against default judgments in civil cases, protections against foreclosure, and the ability to terminate housing and car leases without penalties.

Veteran-focused fintechs—especially lending-centric ones—have to contend with an especially stringent regulatory framework for veterans who have recently left the military. The rate reduction for pre-service mortgages applies for another year after active duty service, setting up the need for time-sensitive compliance-related monitoring.

Military Lending Act

The Military Lending Act limits many loan products for active servicemembers and dependents to 36%. It does not apply directly to veterans, but its rigorous enforcement demonstrates the extent to which regulators actively oversee the financial protections that affect military communities.

Community Reinvestment Act

The Community Reinvestment Act of 1977 is designed to encourage certain financial institutions to meet the credit needs of the communities they are chartered to serve. Regulators released a notice in 2022 intending to update the rules of the CRA to reflect how needs and geographies have changed in the decades since the Act’s establishment.

The Association of Military Banks of America (AMBA) has lobbied to update the CRA’s language to accommodate how the military community spans many geographies, and doesn’t reflect the CRA’s current local geographic language. “We’ve made some headway, but there is much more discussion needed to adapt this 1970s-era law to 2020s-era realities,” the AMBA said. Notably, neobanks serving military families and veterans may find themselves affected by this ambiguity.