A routine loan, lease, or contract can seem harmless until the person on the other end turns out to be on active military duty. That single detail changes everything under the Servicemembers Civil Relief Act, a federal law that shields servicemembers from unfair financial and legal actions while they serve.
Across the country, small lenders, landlords, auto dealers, and storage companies have faced lawsuits and heavy fines for overlooking their SCRA obligations. Most didn’t break the law intentionally. They simply failed to verify a customer’s military status or misunderstood the protections in place.
One compliance mistake can cost your business far more than money. It can damage your reputation and credibility in ways that are difficult to repair.
Before those risks ever surface, there’s a practical way to stay compliant and protected. It begins with understanding how to meet your SCRA responsibilities and prove due diligence from the start.
Steps Local Businesses Should Take to Prevent SCRA Violations
1. Understand the Scope of the SCRA and Who It Protects
Many local businesses underestimate how far the Servicemembers Civil Relief Act reaches. It not only protects full-time military personnel but also covers reservists and members of the National Guard when they are called to active service. This wide scope means compliance is not optional for anyone engaged in lending, leasing, property management, or collections.
Consider a landlord planning to evict a tenant for missed rent or a bank about to repossess a vehicle. If that individual is on active duty, these actions must pause until the proper verification is completed. The same applies to adjusting interest rates or pursuing debt collections. Each step carries legal implications under the SCRA.
2. Verify Military Status Before Proceeding with Any Action
Many SCRA violations begin with a simple oversight, not an act of defiance. Businesses often take action before confirming if a customer is protected under the Servicemembers Civil Relief Act, and that one mistake can trigger serious consequences. One of the simplest yet most critical steps in compliance is performing DMDC verification of military status before initiating actions like foreclosures, repossessions, or evictions.
This verification process helps you determine if a borrower or tenant is currently serving on active duty. For instance, a lender planning to repossess a vehicle or a landlord considering eviction can use the DMDC system to confirm a customer’s status before moving forward. This quick step prevents unintentional violations that could later lead to lawsuits or fines.
In addition, DMDC verification provides documented proof that your business exercised due diligence. If a dispute ever reaches court, that record can serve as legal evidence that you followed proper compliance procedures from the start.
3. Establish a Written SCRA Compliance Policy
Many SCRA violations occur because businesses rely on memory or verbal instructions rather than a clear written policy. Creating a documented compliance plan sets a consistent standard that every employee can follow. This plan should explain how to verify military status, manage disputes, and record all related actions so that no step is left to interpretation.
Designating a compliance officer or department lead ensures accountability and consistency across teams. If a property manager, a loan officer, and a collections agent all follow the same written process, the risk of conflicting actions drops significantly.
4. Train Employees on SCRA Obligations and Consequences
Proper SCRA training turns written guidelines into everyday practice, ensuring your staff can recognize situations that require extra care. This is especially crucial for customer-facing teams and collections departments, where one uninformed decision can result in costly legal exposure.
Effective training should go beyond the basics. Employees need to understand both federal and state-level protections for servicemembers, since certain states extend additional rights beyond the national standard. Real-world examples make these lessons stick, such as past cases where lenders or landlords faced large settlements for failing to verify active-duty status before taking action.
Refresher sessions are just as valuable as initial training. When employees remain aware of evolving laws and compliance expectations, they’re less likely to make avoidable mistakes that could put your business at risk.
5. Maintain Detailed Documentation and Recordkeeping
Accurate records often determine how compliance disputes unfold, which is why documentation should never be an afterthought. Every verification, notice, or communication related to SCRA matters deserves proper tracking. Keeping these details organized provides clear evidence that your business acted responsibly and met its legal obligations.
Modern digital systems make it easy to store and retrieve verification results, correspondence, and related files in one secure place. When a regulator or auditor requests proof, quick access to this data shows that your business takes compliance seriously. Thorough recordkeeping can prevent a small disagreement from growing into a costly penalty.
6. Conduct Periodic Internal Audits and Compliance Reviews
Internal audits are one of the most reliable ways to catch compliance issues before they escalate. Reviewing procedures at set intervals helps confirm that staff members are following SCRA verification and notice requirements correctly. These checks reveal small errors that might otherwise go unnoticed until a violation occurs.
Mock audits are an effective tool for testing readiness. They recreate real compliance situations, such as verifying military status or handling an eviction notice, allowing managers to assess accuracy and consistency across departments.
Partnering with legal counsel or compliance experts adds professional oversight. Their guidance ensures your policies stay aligned with current regulations and enforcement trends. Consistent internal reviews help prevent costly mistakes and demonstrate that your business takes SCRA compliance seriously.
7. Stay Updated on Federal and State-Level Military Protection Laws
Military protection laws evolve more often than most businesses realize, and keeping pace with these updates is key to staying compliant. While the SCRA provides nationwide coverage, several states have introduced their own expanded protections for servicemembers. A policy that meets federal standards might still fall short under stricter state laws.
Subscribing to verified legal updates or trade association bulletins helps your business stay alert to these changes. Official channels often publish updates on enforcement priorities and new requirements for lenders, landlords, and service providers.
It’s also practical to assign one employee or department to monitor new legislation and adjust procedures accordingly. This simple step ensures your compliance efforts remain consistent and legally sound across every level of operation.
Conclusion
Complying with the Servicemembers Civil Relief Act reflects how responsibly a business operates. Each verified record, trained employee, and internal review strengthens a culture of diligence that helps prevent costly mistakes. Strong compliance systems protect both servicemembers’ rights and the company’s reputation.
Businesses that view compliance as an ongoing responsibility, not an occasional task, earn lasting credibility. Staying proactive and informed reduces risk, builds trust with customers, and safeguards long-term success.
