NEW YORK -(Dow Jones)- The U.S. Attorney General has "several" ongoing investigations into violations of a law meant to protect active-duty members of the military from high interest rates and foreclosures.
A spokeswoman for the Department of Justice said in an emailed statement that the investigations are looking into lenders who overcharged and foreclosed against the homes of servicemembers without court orders.
The spokeswoman declined to identify which lenders were under investigation or how long the investigations had been ongoing.
Last week J.P. Morgan Chase & Co. (JPM) admitted it had overcharged more than 4,000 family members and foreclosed on 14 in problems it turned up after an internal review. Chase is facing a civil lawsuit in South Carolina from U.S. Marine Capt. Jonathan Rowles, who claims he was overcharged and is seeking punitive damages.
Chase's review is ongoing and the bank said it has now set up a dedicated team of employees to handle military loans. It is mailing about $2 million to the overcharged servicemembers and had already resolved 13 of the foreclosures.
"We deeply regret any difficulty this has caused the Rowles and anyone in the armed forces who experienced problems," a statement from the bank read. "There is no excuse for the problems they encountered with their loans."
Richard Harpootlian, Rowles' lawyer, said previously that he had contacted prosecutors about his client. He added Chase's lawyers said in court that prosecutors had contacted them.
Chase declined to comment about the Department of Justice.
Following Chase's admission, other lenders said they are examining their own practices and procedures. Delaware Attorney General Beau Biden sent a letter to other lenders demanding they review their operations and make sure military families are treated properly under the law.
The Servicemembers Civil Relief Act caps interest rates for loans to active-duty military members at a 6% annual rate and shields them from foreclosure. The law applies to "any debt incurred" by a servicemember, including credit cards and car loans, which typically carry much higher rates; the law makes some exceptions to its rules. The law defines active-duty as "full-time" service, including tours and training, and says those who knowingly break the act face prison and fines.
The letter from Biden's office focuses on home lending, demanding action from Citigroup Inc. (C), Bank of America Corp. (BAC), Wells Fargo & Co. (WFC), PNC Financial Services Group Inc. (PNC), Ally Financial Inc. and Goldman Sachs Group Inc.'s (GS) Litton Loans.
Citi, Ally and Litton Loans all said previously they are examining their practices, though they add they regularly check that operations abide by regulations. Ally, formerly GMAC, added it is stepping up its efforts to publicize the act in its loan pamphlets and mailings to make sure servicemembers understand the law.
Bank of America and Wells both said they will respond to the letter, but their practices are sound. PNC has declined to comment about internal reviews or discussions with government officials.
The lenders have said they haven't yet uncovered any problems similar to J.P. Morgan's.
Bank of America, Citigroup, Wells Fargo and PNC declined to comment on the Department of Justice. Ally Financial and Litton Loans didn't immediately respond to a request comment.
Sen. Jack Reed (D., R.I.) had sent a letter to U.S. Attorney General Eric Holder asking him to look into the matters after Chase revealed its problems. The spokeswoman said the attorney general had received the letter and was reviewing it.
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