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OCC Reminds Banks of SCRA
In Advisory Letter 2004-8, the OCC provides banks with a summary of requirements under the SCRA (Servicemembers Civil Relief Act) which became law on December 19, 2003 and modifies and replaces the familiar SSCRA.
For financial institutions, the most significant requirement is the 6% interest rule. This is almost unchanged from the old SSCRA in that the rate is the same. However it now differs by including debts shared with a spouse.
The interest rate provision requires creditors to totally forgive interest (including some finance charges) in excess of 6%. This is forgiveness, not a deferral of the contract rate of interest. The covered transactions are those incurred by the servicemember before entering military service.
The servicemember must take action to trigger the act by notifying the creditor and by providing a copy of the military orders. Coverage is triggered as long as the servicemember provides the notice and orders no later than 180 days after termination or release from military service. In short, the service member has 6 months after returning to seek this relief. The rate reduction must take effect as of the date of the servicemember's call to military service, even if the notice was provided only after the servicemember returned.
The fact is that the act provides that the servicemember must notify the creditor and provide proof of service. This is the minimal standard of compliance. Nothing in the act prevents the creditor from helping the servicemember through the process. Consider this a public service opportunity to support a volunteer army - and avoid bringing back the draft.
Copyright © 2004 Compliance Action. Originally appeared in Compliance Action, Vol. 9, No. 6, 6/04
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