In addition to amendments to the Fair Credit Reporting Act dealing with the reporting of adverse information on servicemembers by consumer reporting agencies, the National Defense Authorization Act (NDAA) as passed by the House and now headed to the Senate includes amendments to the Servicemembers Civil Relief Act that restrict the use of arbitration agreements and waivers of SCRA protections.

Arbitration.  The NDAA adds a new provision to the SCRA that requires post-dispute written consent to use arbitration “whenever a contract with a servicemember, or a servicemember and the servicemember’s spouse jointly, provides for the use of arbitration to resolve a controversy subject to a provision of [the SCRA] and arising out of or relating to such contract.”  All parties to the dispute must give such written consent.  The requirement applies to all contracts “entered into, amended, altered, modified, renewed, or extended after the date of the enactment of [the NDAA].”

The Military Lending Act, which applies to certain loans made to servicemembers already on active duty, prohibits the use of mandatory arbitration agreements in loans covered by the MLA.  The proposed SCRA amendment would round out that protection by restricting the enforcement of arbitration provisions against active duty service members where the underlying agreement was made before the start of active duty service.  (The SCRA’s coverage, however, is broader than the MLA.  The MLA applies to loans covered by TILA, with exceptions for purchase money loans and mortgages, while the SCRA covers a wide range of obligations, not just loans.)

Waivers.  The SCRA allows a servicemember to waive SCRA protections and generally requires that for a waiver to be effective, (1) it must be in writing and (2) the waiver agreement must be separate from the document creating the obligation or liability to which the waiver applies and executed during or after the servicemember’s period of military service.

The NDAA amends the SCRA’s waiver provision to add the requirement that for a waiver to be effective, it must be agreed to after a specific dispute has arisen and must identify the dispute.  The amendment applies to waivers made on or after the date of the NDAA’s enactment.