If we want to offer to lower the interest rate on our loan to someone covered by the SCRA, can we charge a fee for that?

When you write "offer", are you offering to lower it to something below the required 6%? If the rate is changed to 6% you can't charge any fees.

http://www.bankersonline.com/lending/guru2008/gurus_ldng121508d.html

From above link: "If you change the rate to 6% and charge a $5 late fee then you have exceeded the interest rate allowable under the SCRA. The best course of action is to set the interest rate to 6% and waive all other fees for the term of active duty."

Yes,the offer to lower would be below the 6%.

If you said "you are entitled to a 6% rate under the SCRA, and for $500 we will lower it to 5%" I would say that if the fee is larger than the savings, you'd have a UDAP issue. If the fee is lower than the savings, you might be OK, but I'm not sure of the thought process behind this.

Regardless of the fee charged I would have to think it would be classified as a service charge or other fee which falls in the definition of interest and therefore it most likely would cause the effective rate to exceed 6%.

Whoever thought of this idea is on a slippery slope and as Andy said you better look at the UDAAP very closely.

Good point Dan. The fee would be "interest" as it is defined in the SCRA. So depending on the loan amount and the fee amount, charging to bring it down to say 4% might actually exceed or reach the 6% amount. That would certainly be deceptive based on overdraft opinions banks are getting now. (i.e. the person pays a fee and essentially gets nothing.)