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SSCRA Rate Reductions & Timing
by Mary Beth Guard, BOL Guru

Question: I am trying to research a request made by one of our customers that has sought relief under the Soldiers' and Sailors' Relief Act. They contacted us earlier this year requesting the 6% rate reduction on their credit card. We complied with the request at the time of notification. However, they now want us to make the reduction retroactive back to when they were called to active duty. The account was opened in October 1998 and he was called to active duty August 1999. No one seems to know the answer and all the documentation that I have read does not say that the 6% is retroactive.

In addition, some of the individuals that I sought guidance from indicated that it is only effective during war times and only for customers who are called to active duty only. They think that the customers who enlist do not fall in this category. I thought that had changed.

Answer: The SSCRA provides protection for individuals who are in the military service. The interest rate provision you refer to (that requires a reduction to 6%), applies in two instances:
  1. where the individual incurs a debt, then enlists in the military; and
  2. where the individual is in the reserves or the Guard and incurs a debt and is subsequently called to active duty.
The law is in effect all the time -- not just during times when we are involved in a war.

If your customer was in the reserves or the National Guard and obtained a loan from you, the interest rate reduction applies when their active duty commences -- even if you don't learn about it until later. In this case, it means the rate reduction will be retroactive.

As for individuals who enlist in the regular armed services (as opposed to the Guard or Reserves), you look at when they obtained the loan and when they enlisted. In order to qualify for the rate reduction, the debt must be a pre-service obligation (in other words, they must have entered into the loan contract before they enlisted) AND they must have subsequently enlisted in the military. If that is the case, they qualify for the rate reduction, even if it is not a time of war.

We have a whole page on devoted to Soldiers' and Sailors' Civil Relief Act issues. I think you will find it very helpful.

The original version appeared in the October 2002 edition of the Oklahoma Bankers Association Compliance Informer.

First published on 3/31/03

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