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AUGUST 22, 2014


Servicemembers Civil Relief Act (SCRA)


The Consumer Financial Protection Bureau (CFPB) is responsible for ensuring compliance with the Act and has asked bank examiners to watch for military-specific issues. With this in mind, it is extremely important for financial institution to be certain their policies and procedures comply with protections of the SCRA.


Coverage of the Act:

The Act protects members of the Army, Navy, Air Force, Marine Corps, and Cost Guard, including members of the National Guard, as they enter military service (active duty), as well as commissioned officers of the Public Health Service and National Oceanic and Atmospheric Administration engaged in active service.


Maximum Loan Interest Rate:

Although the SCRA affords various protections, provisions regarding interest rates receive the most attention. Obligations incurred by the servicemember, or servicemember and spouse jointly, prior to entry into military service (including credit card and other open-end credit) must bear an interest rate at no more than six percent per year.  This applies to the individual servicemember’s debt or joint debt with a spouse that was entered into prior to the servicemember’s military service. 


Interest Rate Reduction:

The SCRA requires that the reduced interest rate must continue throughout the period of military service.  For credit obligations that are secured by a mortgage, trust deed or other security in the nature of a mortgage, the SCRA, as amended by HERA, provides that the reduced interest rate must apply during the period of military service and for one year after the end of the servicemember’s military service


Notice to the Creditor:

The SCRA provides that the servicemember must give the creditor written notice and a copy of the servicemember’s military orders to receive the interest rate reduction.  The notice must be provided to the creditor no later than 180 days after the service member’s termination or release from military service, and the creditor must apply the interest rate reduction effective as of the date of the servicemember was called to military service.