The Servicemembers Civil Relief Act Flashcards
What are the three tests set up by the Act to determine if an individual will be protected?
The three part coverage test — Is the member: (1) in the military service of the United States; (2) on active duty; and (3) materially effected as a result of active duty status.
What must a servicemember covered by the SCRA do to receive reduced rates?
The SCRA requires the servicemember to provide creditors with a written notice and a copy of the military orders calling the servicemember to active duty, as well as any orders further extending military service. The notice must be provided not later than 180 days after the date of the servicemember’s termination or release from military service. Once the credit union receives this notice, it must
reduce the interest rate on any preservice debt as of the date on which the servicemember was called to military service.
Y or N
If the credit union and the member agree to modify or renegotiate the terms of the obligation, does the member waive all rights to the provisions of the Act?
No. A mutually agreed upon modification allows the credit union to collect payments without judicial intervention and may allow a loan rate of greater than 6 percent. However, even though the servicemember agrees to the modified terms, he or she does not waive all other rights under the Act, such as the right to have court proceedings stayed or vacated.
Under the Act, what is the interest rate limit for members on active duty status?
The maximum allowable interest is 6% on loans taken out prior to going on active military duty. Any future advances would be at the original contract rate.
If the credit union does not believe the member qualifies for the interest rate reduction, what action can be taken?
The credit union must prove in court that the servicemember’s ability to repay the loan at the original interest rate has not been materially affected by being placed on active military duty.
How does the SCRA treat lost interest?
The credit union must forgive any interest in excess of 6% that would have been incurred by the member if no rate cap was in effect. The term “interest” includes service charges, renewal fees, or any other charges (except bona fide insurance) with respect to an obligation or liability. In addition, Section 207(a)(3) of the SCRA requires credit unions to reduce “the amount of any periodic payment due from a servicemember … by the amount of the interest forgiven … that is
allocable to the period for which the payment is made.
Under the Act, what constitutes materially affected?
Materially affected means: (1) unable to take full advantage of legal rights (not being able to appear in court); and (2) unable to meet financial obligations as a result of active duty (a cut in pay).
At what point can the interest rate be raised to the original contract rate?
