Synchrony Bank Assesses Illegal ‘Veteran Penalty’ on Military Service Members, Class Action Lawsuit Claims

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A proposed class action lawsuit alleges Synchrony Financial and subsidiary Synchrony Bank have unfairly penalized military service members by unlawfully increasing interest rates and fees on their outstanding credit card balances when they leave active duty.

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The 31-page Synchrony Bank lawsuit was filed by two service members who say they were entitled to receive benefits from Synchrony in the form of reduced interest rates and fees, pursuant to the Servicemembers Civil Relief Act (SCRA).

Per the suit, the federal law requires the bank to reduce an eligible service member’s debts to a six-percent interest rate from the date deployment orders are received through the subsequent active-duty period. The SCRA also mandates that interest above six percent must be permanently forgiven, the case adds.

The complaint points out that Synchrony’s military benefits program promises to provide service members with a zero-percent interest rate on all balances on their credit cards—a benefit that is “more generous” than what is required under the SCRA.

Although Synchrony purports to reduce and permanently forgive interest rates in compliance with the SCRA, the bank, in fact, retroactively reclaims service members’ benefits by raising the interest and fees on their outstanding balances after they return from active duty, the filing alleges.

According to the lawsuit, the bank imposes this interest rate increase only upon returning service members, and not on other non-military customers.

“By imposing this veteran penalty only on SCRA recipients, and not on any other customer, Synchrony creates the illusion of SCRA compliance without actually lifting servicemembers’ financial burden as the SCRA requires,” the suit charges. “Synchrony’s promise to be more generous than the SCRA—by providing a 0% interest rate and no fees—is also made false by the veteran penalty.”

The case alleges that the bank has not only violated the SCRA but breached its duties to service members and veterans, who rely on the federal law that was explicitly designed to prevent the creation of “debt traps.”

One plaintiff, a senior master sergeant who has served in the U.S. Air Force Reserves and Air Force Air National Guard since 2007, says that when Synchrony terminated him from its military benefits program, he had balances of more than $7,500 and $2,600 on multiple credit cards. The man claims that the bank raised the interest rates on these outstanding balances from zero percent to 26.9 and 19.9 percent, respectively.

The complaint argues that Synchrony’s alleged SCRA violations “undermine[] our nation’s commitment” to military service members, who, as the filing tells it, are particularly vulnerable in the face of the bank’s “veteran penalty.”

The lawsuit looks to represent anyone who requested and/or received reduced interest or fee benefits from Synchrony on an interest-bearing obligation because of their military service.

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