You Asked for Your SCRA 6% Mortgage Rate. Your Servicer Can't Punish You for It.
A VA loan servicer just settled claims it denied the 6% SCRA rate and falsely reported servicemembers delinquent. Here's what the law says and what to check.
You got orders. You did what the base legal office told you: you sent your mortgage servicer a copy and asked for the 6% interest cap you’re owed under federal law. A few weeks later a letter says you qualify, but your rate is already under 6%, so nothing changes. You know your rate is higher than that. Then your payment goes up instead of down.
That’s what the Justice Department says happened to servicemembers with one VA home loan servicer. If it sounds familiar, you have more rights than that letter let on.
What happened
On October 19, 2026, the Justice Department announced a settlement with Village Capital & Investment LLC, a Henderson, Nevada company that makes and services VA-guaranteed home loans. The company agreed to put $425,000 into a fund for affected servicemembers and pay a $79,380 civil penalty. The department calls that penalty the maximum for a first violation.
The government reviewed SCRA rate requests from March 1, 2020 to April 1, 2025 and found 41 accounts where the benefit was handled wrong. Here’s what it alleges:
- The company didn’t cut the rate to 6% back to the date of the servicemember’s orders, and didn’t lower the monthly payment by the interest it was supposed to forgive.
- It sent a form letter saying the borrower qualified, but “since your current interest rate is below the 6.00% rate cap,” nothing would change. According to the agreement, it sent that letter even when the rate was above 6%.
- It used the rate requests as the basis for speeding up principal payments, which means demanding more principal each month.
- It falsely reported to the Department of Veterans Affairs that servicemembers who got the rate cut were behind on their payments.
Those are the government’s allegations. Village Capital settled without a trial, and a settlement is not a finding that the claims are true.
What the law actually says
The Servicemembers Civil Relief Act, or SCRA, is a federal law that protects people while they serve. Two parts of it matter here.
The 6% cap, 50 U.S.C. § 3937. If you took out a loan before you went on active duty, the interest can’t be more than 6% while you serve. For a mortgage, the cap lasts through your service and for one year after. The interest above 6% isn’t put off until later. It’s forgiven, and your monthly payment has to drop by that amount. “Interest” includes service charges and fees, so a lender can’t move the cost into a new line item. You ask in writing with a copy of your orders, any time during service and up to 180 days after you get out. Once the lender has your request, the cut goes back to the date you were called to service.
No punishment for asking, 50 U.S.C. § 3919. This section says applying for or getting certain SCRA relief can’t, by itself, be the reason a lender changes your loan terms or makes an adverse report about your creditworthiness. The government says Village Capital broke this section with the payment changes and the reports to the VA.
The money. For each violation, the agreement pays back whatever extra principal or over-6% interest the servicemember paid. On top of that comes $500 or three times that refund, whichever is larger. So if you overpaid $2,000, you’d get $2,000 back plus $6,000, for $8,000 total. Divide the $425,000 fund by the 41 accounts found so far and you get about $10,400 each. That’s only an average. The company also has to list requests made after April 1, 2025, so more accounts could be added and the fund could grow.
Why this costs more than the interest
The rate cut matters. Picture a $250,000 balance at 7.25%. Dropping to 6% saves roughly $3,100 in interest over the first year, about $260 a month. That’s my rough math, not a figure from the case.
The bigger cost is the false delinquency report. The government’s complaint is about reports to the VA. But a mortgage marked late can follow you, and most negative items can stay on a credit report for up to seven years under 15 U.S.C. § 1681c(a)(5). That’s why the settlement goes past the VA. Within 30 days, Village Capital has to find any wrong credit reporting caused by its handling of the rate cut since March 1, 2020. It has to ask the VA and every credit bureau it reports to for a correction. If you ask, it also has to give you a letter backing you up for any lender, bureau or housing provider.
That cost lands on more than one person. Co-borrowers, often a spouse, share any refund of extra payments. A spouse who’s on the loan may also have a late mark on their own report.
What to do, free
- Ask in writing. Send your servicer a written request for the SCRA rate with a copy of your orders. Keep a copy and proof you sent it. If you don’t have orders handy, lenders can check your status on the Defense Manpower Data Center site.
- Check the math. The lower rate should start on the date of your orders, and your monthly payment should drop. A letter that says “no change” while your note shows more than 6% is worth questioning.
- Pull your credit reports. AnnualCreditReport.com gives you free weekly reports from all three bureaus. That’s bureau policy, and 15 U.S.C. § 1681j(a) guarantees at least one free report a year. Look at the mortgage’s payment history for the months after your request. If you’re on active duty, you also get free credit monitoring from the bureaus. I explained how in this article.
- Dispute a false late mark. Under 15 U.S.C. § 1681i(a)(1)(A), the bureau must investigate for free within 30 days, and up to 15 more if you send new information during that time. If the item turns out to be inaccurate or can’t be verified, § 1681i(a)(5)(A) says it must be deleted or corrected. Separately, § 1681s-2(a)(1)(A) bars a lender from reporting information it knows or has reasonable cause to believe is wrong. Attach your rate request and your orders. These are disputes for investigation; the outcome depends on the facts, and results vary.
- Get free legal help. The Justice Department tells servicemembers who think their SCRA rights were violated to contact their nearest Armed Forces legal assistance office. Locations are at legalassistance.law.af.mil. You can also file with the Justice Department at servicemembers.gov.
- Know you can sue. Under 50 U.S.C. § 4042, a person harmed by an SCRA violation can sue for damages and recover attorney fees. This article is education, not legal advice.
I served in the Army from 1989 to 1999, and later I spent a long stretch fighting wrong information on my own credit report. So I’ll say it straight: a form letter isn’t the final word. Check the numbers yourself. If you get stuck working through it, bring it to our free community on Skool.
Sources
- VA Home Loan Servicer Village Capital to Pay Over $500,000 for Violating Servicemembers’ Rights — U.S. Department of Justice, Office of Public Affairs, 2026-10-19
- Settlement Agreement Between the United States and Village Capital & Investment, LLC — U.S. Department of Justice, Civil Rights Division, October 2026
- VA loan servicer Village Capital to pay $500,000 over alleged SCRA violations — News 3 Las Vegas (KSNV), 2026-10-19
- I’m in the military. Are there limits on how much I can be charged for a loan? — Consumer Financial Protection Bureau, last reviewed 2023-05-31
- Protections for servicemembers and veterans — Consumer Financial Protection Bureau, updated 2024-12-12
- 50 U.S. Code § 3937, § 3919, § 4041 and § 4042 — Legal Information Institute, Cornell Law School
- 15 U.S. Code § 1681c, § 1681j, § 1681i and § 1681s-2 — Legal Information Institute, Cornell Law School
- Free credit reports — Federal Trade Commission, June 2026
