Once we reduce the interest rate to 6% (retroactively of course) and reduce the payment amount, do we give the Servicmember borrower a change in terms notice that shows the new interest rate and payment amount?

We simply send a brief letter informing the servicemember their request for rate relief has been granted, what the new payment is, the approximate expiration date of the relief based on their orders and a brief statement thanking them for their service to our country.

So we don't have to redisclose under Reg Z?

When the active duty has ended and the time comes to change the rate back along with reamortizing the payment...do we need to send a new TIL disclosure with the new payment amount and APR? Or can we just send our letter to the customer stating that since the end of active duty has come that we are now changing the loan terms back?

There is no requirement to redisclose under Z that I know of. You could, but there was a temporary reduction and then you revert to the original terms, perhaps wth a lower payment.

Andy - why would the payment amount change? Are you supposed to reamortize using the principal balance after the protection period - which would result in a lower payment or are you just suggesting a nice bank would do that?

I think many banks do that so the loan pays on the same time schedule. Reverting to the scheduled payment should cause it to pay sooner, though I haven't played with any scenarios to see how the cases would be. The SCRA doesn't call for one way or another.

I was doing some research on the 10/01/11 requirements for Reg Z and came across this thread. From the Section by Section analysis in the Federal Register dated 11/2/10 on page 67469 it states: When the SCRA or similar state statute ceases to apply,§ 226.9(c) generally requires the creditor to provide 45 days’ advance notice of any increase in a rate or fee.

http://edocket.access.gpo.gov/2010/pdf/2010-26515.pdf

The right to reject wouldn't apply but it appears the 45 day notification would? We are not entirely clear on that.

I need to look at this when I am on my desktop. Jack taught on this I believe and had a Q&A that exempted SCRA rate changes. I will look when I get home later this week.

I believe you are correct in that the increase need not be agreed to, but the notice is still required. The clip below is from the final rule effective Feb 22, 2010.

"Several industry commenters stated that the Board should provide an exception to the advance notice requirements for rate increases made when the provisions of the Servicemembers Civil Relief Act (SCRA), 50 U.S.C. app. 501 et seq., which in some circumstances requires reductions in consumers’ interest rates when they are engaged in military service, cease to apply. These commenters noted that proposed § 226.55 provided an exception to the substantive repricing requirements in these circumstances. However, the Board is not adopting an analogous exception to the notice requirements in § 226.9. The Board believes that consumers formerly engaged in military service should receive advance notice when a higher rate will begin to apply to their accounts. A consumer may not be aware of exactly when the SCRA’s protections cease to apply and may choose, in reliance on the notice, to change his or her account usage or utilize another source of financing in order to mitigate the impact of the rate increase."

The above applies to open end credit, http://www.bankersonline.com/regs/226/226-9.html.