Servicemembers Civil Relief Act (SCRA) Flashcards
A number of bank customers are members of the Army Reserve and have been called to active duty for six months. Your bank’s president wishes to issue a press release stating that the bank will suspend all loan payment requirements while loan holders are on duty, extend the maturity date of each loan, and permit interest to accrue at 10% while the loan holders are on active duty. You are asked to review the press release. Which of the following statements represents the advice you should give the president?
A. The bank is in full compliance with the Servicemembers’ Civil Relief Act
B. The bank must reduce the interest rate to 6% on the date that the service persons enter the area declared as an official “Disaster Area”
C. The bank must reduce the interest rate on loans to military persons to 6% effective 30 days after notice is received by the bank
D. Upon request, the bank must reduce the interest rate on the loans to 6% effective on the date that the servicemembers are called to report for active duty, and remain at 6% until they are released from orders
D. Upon request, the bank must reduce the interest rate on the loans to 6% effective on the date that the servicemembers are called to report for active duty, and remain at 6% until they are released from orders
The SCRA requires that when a servicemember enters active duty (not when they enter a disaster area) creditors must reduce the interest rate on pre-existing obligations. Also, the rate must be reduced upon receiving the notice from the servicemember, not 30 days after receiving the notice. An interest rate of 10% is too high, which is what the bank president is suggesting. The correct answer is D because interest must be reduced to 6% or lower upon the effective date that the servicemembers are called to report for active duty.
When terminating a motor vehicle lease under the terms of the SCRA, the motor vehicle must be returned no later than __ days after the date of the termination notice.
15
Termination of a lease is made
1. By delivery by the lessee of written notice of termination, and a copy of the servicemember’s military orders, to the lessor; and
2. In the case of a lease of a motor vehicle, by return of the motor vehicle by the lessee to the lessor no later than 15 days after delivery of written notice.
Creditors may not charge interest above 6% in connection with a mortgage, trust deed, or other similar loan until when?
1 year after the end of active duty
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.
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.
Any rent or lease amounts that are unpaid for the period preceding the lease termination shall be paid how?
Paid on a prorated basis
True/False: The SCRA interest rate cap does NOT apply to an endorser of a PLUS loan made to a parent or a graduate/professional student unless that individual is also performing eligible military service.
True. SCRA interest rate cap only applies to the service member themselves and does not extend to co-signers on loans, including a parent or other individual acting as an endorser on a PLUS loan, unless that co-signer is also actively serving in the military
The SCRA does apply to other types of loans, including private, Direct, and FFELP loans, that were obtained before a service member entered the military.
True/False: Violation of SCRA is a misdemeanor and may be subject to fines and imprisonment of up to one year or both.
True
To be subject to criminal penalties, the violation of the SCRA must be done knowingly. This penalty is generally associated mortgage foreclosures and property repossessions.
What does the term “service member” include?
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 Health Service, Space Force, or National Oceanic and Atmospheric Administration.
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
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.
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.
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.
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.
C. 6% for all accounts made prior to the servicemember’s call to active duty
Creditors are restricted from enforcing, or foreclosing upon, mortgage, trust deed or other similar loans until when?
1 year after the end of active duty
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 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.
B. File a petition with a court of competent jurisdiction 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.
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.
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.
SCRA covers leases of premises if the lessee enters military service during the lease term and receives a permanent change of station or deployment order for __ days or more.
90
A residential property lease may be terminated by the servicemember if any of the following conditions is met:
* The lease was entered into before the member’s entry into military service.
* The lease was entered into while in military service and thereafter receives orders for a PCS.
* The lease was entered into while in military service and thereafter receives military orders to deploy for more than 90 days.
The protection also applies to the service member’s spouse or any other dependent who signed the lease with the service member.
