Village Capital & Investment LLC, a Henderson, Nevada, servicer of VA-guaranteed home loans, will pay more than $500,000 to settle Justice Department claims that it mishandled the 6% interest cap for servicemembers, the department said Oct. 19. The company allegedly failed to apply the cap correctly to at least 41 mortgages.
The department’s release says the money covers at least $425,000 for affected servicemembers and a $79,380 civil penalty. The settlement resolves allegations, and no lawsuit has been filed.
What the Government Says Village Capital Did
The Servicemembers Civil Relief Act lets people who took on a debt before entering military service ask the lender to cut the interest rate to 6% a year. The Justice Department’s service member rights page says the lender must forgive the interest above 6%, not defer it, and must apply the change retroactively. It also says a lender cannot speed up repayment of principal because someone made the request. For mortgages, the cap lasts through the whole period of service and one year after.
The government alleges Village Capital did not follow those rules. According to the signed settlement agreement, the company refused to reduce rates to 6% back to the date of a servicemember’s orders and failed to lower monthly payments by the amount of interest forgiven. The agreement also alleges the company sent some borrowers form letters saying their rates were already below 6% when they were above it.
The most serious allegation concerns retaliation. The agreement says the company accelerated principal on loans after borrowers asked for a rate cut and falsely told the Department of Veterans Affairs that borrowers who received reductions were delinquent. It cites Section 3919 of the act for that conduct and Section 3937 for the rate-cap claims. The government calls the conduct a pattern or practice. Village Capital’s release from the department contains no statement from the company.
How the Payments Work
The agreement says the government identified 41 accounts where the cap was applied incorrectly, based on requests made from March 1, 2020, to April 1, 2025. Requests made after April 1, 2025, must be listed and documented so the government can review them as well. The release says the servicemember share is at least $425,000, so later accounts could add to it.
Each payment has two parts. The first is the amount of any accelerated principal, plus any interest or fees above 6% that the borrower paid from the date of the orders through the earlier of one year after service ends or the effective date. The agreement splits that sum equally among all co-borrowers, including those who never served. The second part goes only to the servicemember. It equals $500 or three times the first amount, whichever is larger.
Spread evenly across the 41 accounts, $425,000 comes to about $10,366 each. That is a calculation from the release and the agreement, not a figure either document states, and actual checks will vary with each loan. The timeline runs through the government’s review. The company must put $425,000 into an interest-bearing escrow account within 10 days of the effective date.
The government has 60 days after receiving documents to issue its list of violations and amounts. Village Capital then has 30 days to submit evidence, and checks go out within 30 days of the final determination. Checks stay valid for at least six months, and the company may not refuse a payment because of a waiver, release or arbitration agreement. Money not distributed within four years goes to the U.S. Treasury. The $79,380 civil penalty goes to the Treasury within 10 days. The release calls it the maximum for a first violation of the act.
What Changes at the Company
The agreement requires Village Capital to submit new SCRA policies within 30 days. They must offer several ways to request the benefit, check eligibility through the Defense Manpower Data Center database, decide requests within five business days and send written notices within 10 business days. The company may not raise a rate above 6% without confirming through that database and giving prior notice. Covered employees must complete annual training and sign acknowledgments.
The company must also find credit reporting errors caused by the denied benefits from March 1, 2020, forward. Within 30 days it must ask the VA and every credit bureau it reports to for corrections, then certify those requests. Every six months it must report SCRA complaints to the government, along with checks issued and cashed.
The agreement runs four years. If the government says the company is in breach, Village Capital has 30 days to cure it. After that the government may sue in the U.S. District Court for the District of Nevada, which has exclusive jurisdiction, and the company agrees not to raise time-based defenses during the term. No lawsuit has been filed; the agreement resolves the claims without legal proceedings. In exchange, the government will not pursue Section 3919 and 3937 claims for conduct from March 1, 2020, through the effective date. It keeps the right to pursue other claims.
How the Deal Compares with Past Cases
In its release, the department says it has obtained more than $490 million for more than 153,000 servicemembers under the act since 2011. Dividing the first figure by the second gives about $3,200 per servicemember. That is a calculation from the department’s totals. It averages across foreclosure, repossession and rate cases of very different sizes.
The Village Capital figures are smaller in scale than earlier cases. In a 2012 settlement, Capital One agreed to pay about $12 million over allegations that included denied 6% requests and foreclosures and repossessions without court orders. That case involved far more kinds of conduct than the current one, which concerns mortgage rates and the reporting that followed.
Sigal Chattah, first assistant U.S. attorney for the District of Nevada, said the settlement “serves as a clear directive to VA home loan servicers everywhere,” according to the department’s release. Harmeet K. Dhillon, assistant attorney general for the Civil Rights Division, is quoted in the same release on lenders that refuse to honor the benefits the act guarantees.
What Servicemembers Can Do
The release tells servicemembers and dependents who think their rights under the act were violated to contact the nearest Armed Forces Legal Assistance Program office. It points to servicemembers.gov for more on enforcement. The department’s rights page says a request must be made in writing, with a copy of orders or another indicator of service, within 180 days after service ends.
