Skip to content
BOL Conferences
Thread Options
#1592329 - 08/16/11 02:58 PM Can the rate cap be less than 6%?
Huh? Offline
Member
Joined: Jan 2004
Posts: 50
Southeast
There is conversation in our bank to implement a rate cap of 3% instead of 6%. Can we do that?? My reading and interpretation leads me to believe that if the rate is >6% then we have to lower to not exceed that. But I'm not sure if we can move to a lower cap. Obviously we woudn't be exceeding the 6% under the Act but I'm wondering if it's even permissible. I would think there could be lots of issues with servicemembers complaining because they can't get the same rate break. and what to do with loans that have already been capped at 6% and now we go to 3%.... Input appreciated!

Return to Top
Lending to Servicemembers (SCRA, JWNDAA), War, Terrorism
#1592364 - 08/16/11 03:33 PM Re: Can the rate cap be less than 6%? Huh?
Dan Persfull Offline
10K Club
Dan Persfull
Joined: Aug 2002
Posts: 47,517
Bloomington, IN
What do you mean by "rate cap"?

Are you saying that borrowers requesting SCRA relief will have their rates reduced to 3% instead of 6%? You can reduce the rate to whatever you like below the required 6%. The SCRA only states you can not earn greater tan 6% during the servicememeber's active duty but it does prevent you from eliminating interest entirely if that is what you choose to do.
_________________________
The opinions expressed are mine and they are not to be taken as legal advice.

Return to Top
#1592368 - 08/16/11 03:37 PM Re: Can the rate cap be less than 6%? Dan Persfull
Huh? Offline
Member
Joined: Jan 2004
Posts: 50
Southeast
Thank you Dan, yes reducing the rate to 3% instead of 6%. Thank you for your reply!

Return to Top
#1592845 - 08/17/11 02:30 PM Re: Can the rate cap be less than 6%? Huh?
Andy_Z Offline
10K Club
Andy_Z
Joined: Oct 2000
Posts: 27,748
On the Net
Other than to "support the troops" there is no reason to go below 6% unless you want to earn other fees. Most fees are considered interest under the SCRA by definition. So an interest rate of 6% means those fees are turned off. If you drop below 6% you can charge fees, but you still need to do the math to ensure you don't exceed the 6%.

After the mortgage foreclosure problems involving SCRA violations, some creditors have settled on 4% rates, as I recall from the press.
_________________________
AndyZ CRCM
My opinions are not necessarily my employers.
R+R-R=R+R
Rules and Regs minus Relationships equals Resentment and Rebellion. John Maxwell

Return to Top

Moderator:  Andy_Z