SCRA

Question 1

In the case of terminating a motor vehicle lease, the motor vehicle must be returned no later than __ days after the date of the termination notice.

Answer 1

15

Question 2

Creditors may not charge interest above 6% in connection with a mortgage, trust deed or other similar loans until when?

Answer 2

1 year after the end of active duty.

Question 3

Eleanor Mumford is an advertising account executive. She is also a pilot in the Air Force reserve. She has a car loan with a 5-year term at a 9% interest rate and a credit card with a $5,000 balance at 12% annual interest. Her unit has been activated and she will be leaving for military service. Her military pay will be less than half her civilian pay. She writes to the bank and asks that the bank lower her interest rates on the credit card and car loan for the duration of her service to 6%. She asks for her monthly car payment to be lowered also. She sends along proof of her activation and military pay scale. What does the bank have to do?

a. The bank must lower the credit card and car loan interest rates but does not have to lower the car payments.
b. The bank must lower both rates and the car payment must be lowered to account for the new interest rate.
c. The bank has to lower only the credit card interest rate.
d. The bank does not have to do either.

Answer 3

b. The bank must lower both rates and the car payment must be lowered to account for the new interest rate.

The SCRA rate cap provision covers these debts because Eleanor entered into both of them before her military service. The bank also is required to lower her payments to account for the forgiven interest. The bank has the option of asking a court to give it some protection from this request, but if Eleanor’s income is substantially reduced by her military service, the court will not protect the bank from this request.

Question 4

Any rent or lease amounts that are unpaid for the period preceding the lease termination shall be paid how?

Answer 4

Paid on a prorated basis

Question 5

T/F: The SCRA interest rate cap does NOT apply to endorser of a PLUS loan made to a parent or a graduate or professional student unless that individual is also performing eligible military service.

Answer 5

T

Question 6

What is MAPR?

Answer 6

Military Annual Percentage Rate

Question 7

Which of the following is not considered a covered borrower under SCRA?

a. An active member of the national guard
b. A 20-year old college student who is the son of an Army sergeant
c. The ex-wife of an active Navy servicemember
d. The mother of a Marine serving overseas who lives with her son’s family

Answer 7

c. The ex-wife of an active Navy servicemember.

The ex-wife of the servicemember is no longer a dependent, so she is not covered.

Question 8

T/F: Violation of SCRA or the John Warner National Defense Authorization Act is a misdemeanor and will be subject to fines and imprisonment of up to one year or both.

Answer 8

T

Question 9

What does the term “servicemember” include?

Answer 9

Active duty military personnel or members of the National Guard on duty for 30 or more consecutive days.

A person on active duty in the federal military service, including members of the Army, Navy, Marine Corp, Air Force, Coast Guard, and all commissioned officers on active service with the Public Heal Service or National Oceanic and Atmospheric Administration

Question 10

Arthur Hadley has been a sergeant in the US Army for 5 years. He has been stationed at an army base in the US for the last 3 years. He has a banking relationship in the town where his base is located. Currently he has a car loan with 2 years remaining on its term and a credit card with a $1200 balance at the bank. Both obligations were incurred after he entered into active military duty. Arthur received word that his unit is being sent overseas on a peacekeeping mission. He informs the bank officer that he would like to have his car loan stayed until he returns from his mission. He would like to have his credit card balance stayed with no payments until he returns. What is the bank required to do?

a. The bank must stay the installment loan payment obligation.
b. The bank must stay the credit card payment obligation
c. The bank must stay both the installment loan and credit card obligations
d. The bank is not required to stay either obligation

Answer 10

d. The bank is not required to stay either obligation

The law does not require a bank to stay any obligations. The bank cannot foreclose or obtain a default judgment without a court’s approval when the borrower is in the military, but there is no requirement to stay an obligation.

Question 11

Stacy Robinson is in the Army Reserve. She has just heard that her unit is being activated and she will be leaving the country for an indefinite amount of time. Her salary in the Army will be close to the salary she has in civilian life. What options does she have under the SCRA to improve her financial situation before she leaves?

a. Ask the bank to lower the rate on her installment loan.
b. Request a mandatory freeze on the rent she must pay for her apartment.
c. Ask her credit card company to suspend charging interest pending her release from active service.
d. Apply for assistance from a special SCRA fund that can cover interest payments wile she is on active duty.

Answer 11

a. Ask the bank to lower the rate on her installment loan.

Of the options presented, asking the bank to lower the rate on her installment loan is the only option specifically afforded to Ms. Robertson under SCRA.

Question 12

To what amount must a bank limit interest on debts under SCRA unless otherwise determined by a court?

a. A rate, specified by military counsel, based on the servicemember’s financial condition at the time of call to active duty.
b. The WSJ’s Prime Rate in effect at the time of the servicemember’s call to active duty.
c. 6% for all accounts made prior to the servicemember’s call to active duty
d. The amount needed to fully amortize the debt while the servicemember is on active duty.

Answer 12

c. 6% for all accounts made prior to the servicemember’s call to active duty

Question 13

Creditors are restricted from enforcing, or foreclosing upon, mortgage, trust deed or other similar loans until when?

Answer 13

1 year after the end of active duty.

Question 14

What is “covered consumer credit” under SCRA?

Answer 14

• Payday loans
• Vehicle title loans
• Tax refund anticipation loans

Question 15

Is a servicemember’s spouse and child covered under SCRA?

Answer 15

Yes

Question 16

Robin Myers defaulted on her car loan at the bank. The bank sent several reminder letters and finally a demand for payment. The last letter said that if she did not pay, the bank would repossess the car. Before its repossession, Robin joined the Marines. She sent the bank a notice that she was now in active military duty and asked the bank to forebear taking any further action against the collateral. What can the bank do?

a. Proceed with self-help repossession of the vehicle since she had already been notified of the default before joining the service.
b. File a petition with a court of competent jurisdiction and ask for permission to repossess the car.
c. Ask Robin’s commanding officer for permission to repossess the car.
d. Repossess the car but don’t sell it until Robin’s military service is over.

Answer 16

b. File a petition with a court of competent jurisdiction and ask for permission to repossess the car.

The bank’s only alternative, other than do nothing, is to ask a court for permission to allow the bank to repossess the vehicle. The court will have to consider whether Robin’s rights can be adequately protected in light of her military service and may not allow the bank to gain possession of the vehicle. However, the bank should consider reputation risk before taking such action.

Question 17

What is a tax refund anticipation loan under SCRA?

Answer 17

Closed-end credit in which the borrower expressly grants the creditor the right to receive all or part of the borrower’s income tax refund or expressly agrees to repay the loan with the proceeds of the borrower’s refund.

Question 18

Martina Ruiz has an individual car loan at the bank. She makes monthly payments of $525 and has 3 years left on the term. She informs the bank that her husband’s US Navy Reserve unit has been activated, and he will be gone for an indefinite period of time. His annual income will now be much less than it was previously. Ms. Ruiz asks the bank to lower the interest rate on this loan to 6% and lower the payments accordingly. Does the bank have to comply with this request?

a. Yes. If Ms. Ruiz can prove that her husband’s military service materially affects her ability to repay the loan, the bank must lower the interest rate and the payments.
b. No. Unless Ms. Ruiz herself is undertaking military service, the bank is not under any obligation to make an accommodation on the payments.
c. Yes, but only if Ms. Ruiz agrees not to drive the car during the duration of her husband’s military service.
d. No. Unless her husband makes the request, the bank does not have to comply.

Answer 18

b. No. Unless Ms. Ruiz herself is undertaking military service, the bank is not under any obligation to make an accommodation on the payments.

The interest rate cap is a protection extended only to loans made by the servicemember or jointly by the servicemember and spouse. In this case, the loan is made only to the spouse.

Question 19

What is a payday loan under SCRA?

Answer 19

Closed end loan with a term of 91 days or less, for $2000 or less and is charged interest or a fee.

Question 20

SCRA covers leases of premises if the lessee enters military service during the lease term or receives a permanent change of station or to deploy with a military unit for __ days or more.

Answer 20

90

Question 21

What is the interest rate cap for SCRA?

Answer 21

6% per year. This will reduce the amount of any payments due.

Question 22

T/F: A motor vehicle lease is terminated once the notice is delivered and the vehicle is returned.

Answer 22

T

Question 23

ABC Lender is located in a state with a consumer protection law requiring lenders to limit the APR on vehicle title loans to 24%. Which of the following is true for ABC Lender?

a. ABC Lender must abide by state law and limit its vehicle title loans to 24% to servicemembers.
b. The federal regulation preempts state law and ABS may charge up to 36% since it is governed primarily by state law.
c. ABC has a choice of law; it may choose either the federal regulations or the state law.
d. ABC may charge up to 36% for nonservicemember borrowers.

Answer 23

a. ABC Lender must abide by state law and limit its vehicle title loans to 24% to servicemembers.

The lender is required to abide by state law since it provides more protection to the borrower.

Question 24

If the lease provides for monthly payment of rent, termination is effective __ days after the date on which the next rental payment is due after the notice is delivered.

Answer 24

30

Question 25

On a motor vehicle lease, the lessor may not charge a ____ ______ charge.

Answer 25

early termination

Question 26

SCRA covers leases of motor vehicles if the lease is executed by a person who thereafter enters military service under a call or order specifying a period of ____ days or more, or receives a change of station or to deploy with a military unit for ___ days or more.

Answer 26

180

Question 27

Under SCRA, the lessee can terminate a lease at the leasee’s option after 1) the lessee enters military service or 2) the lessee receives orders for a PCOS/deployment for __ days or more.

Answer 27

90

Question 28

By court order, ______ of servicemembers are entitled to the same benefits, except for what provision?

Answer 28

dependents

the 6% maximum interest rate provision

Question 29

What is a vehicle title loan under SCRA?

Answer 29

Closed-end credit with a term of 181 days or less, secured by the title of a motor vehicle that is owned by the borrower that is other than a purchase money loan.

Question 30

Under SCRA, what three things must be given orally to the borrower before consummation?

Answer 30

• MAPR
• Description of the payment obligation
• The mandated disclosure of the legal rights of the borrower

Question 31

In order to be eligible for the interest rate cap, what must servicemembers provide?

Answer 31

Written notice AND a copy of military orders.

Question 32

Which of the following is NOT a required disclosure for an income tax refund anticipation loan to a servicemember.

a. The MAPR
b. The APR
c. A description of each of the events of the default
d. A list of all the fees included in the MAPR.

Answer 32

c. A description of each of the events of the default

The disclosures required by a. and d. are specifically required by this regulation. The APR is required by this reg and by Reg. Z.

Question 33

For the purposes of SCRA, what does “interest” include?

Answer 33

Service charges, renewal charges, fees and any other charges.

Question 34

Creditors may not require a covered borrower to pay a MAPR in excess of __% on covered consumer credit.

Answer 34

36%

Question 35

When can a servicemember NOT be evicted from housing?

Answer 35

If the monthly rent doesn’t exceed the threshold ($2,400).

Question 36

Does SCRA apply to covered borrowers that don’t identify themselves?

Answer 36

Maybe. The creditor must provide each potential applicant with a “covered borrower identification statement” prior to becoming obligated on a covered consumer credit transaction. If the applicant signs a statement indicating that he/she is a covered borrower, the regulation will apply. If not, the regulation does not apply unless the creditor receives documentation otherwise indicating that the borrower is a covered borrower.

Question 37

T/F: Any taxes, summonses, title and registration fees, and other obligations of the lessee, including excessive wear, use and mileage fees are due and payable at the time of the termination must NOT be paid by the lessee.

Answer 37

False, they must be.