We have a customer that has enlisted in the Reserves and is currently in boot camp. He has filed for relief under this Act. Is boot camp considered "active duty"?

Thanks for any help!

Yes.

Absolutely.

The customer is active duty at this time. There are circumstances when this is the only time they are active. You could join the reserves (as you indicate is the case here) and go through basic training and training for your job in the reserves. You then drop off active duty and do the weekend and summer requirements.

A copy of their orders will help you determine if this is just for training which could be as little as 16 weeks, a 2, 3 or 4 year commitment. The commitment to the reserves is different than active duty.

Clearly you will want to set some kind of reminder to review the need for rate reduction when this customer is scheduled to complete training and go off active duty. After the period of active duty is over, you can return the rate to its previous level (but not charge extra interest to "make up for lost time.")

Not to simply echo the others, but you should also remember that you may need to adjust some prior payments. The reduction is automatic from the time the borrower enters active duty, not just from when you are notified of the change of status. If your borrower was already in boot camp when you were notified, then a copy of his orders would help you be certain that he received an adjustment for the proper number of prior payments, if applicable.


Wes Sutton
The opinions expressed are not necessarily those of my employer.

Recruiters use the SSCRA now as another "bennie" of signing up as they are going after folks with a little more under their belt than a high school diploma. We once had a law student join the JAG unit of the Navy on graduation request the relief. We figured her income went from zero to quite a bit and really didn't need "relief" but there's no sense in fighting it. Rent "Black Hawk Down." If somebody is signing up to go do that they should get the relief.

Thanks to all of you!!

Here is a different SSCRA question.
Scenario:
Lender receives notice and places loan into SSCRA mode (6% interest rate, etc.). Customer does not make payments. Loan falls delinquent & reaches the point that lender must charge the account off. Lender issues 1099-C reporting the charge off to the IRS.

The IRS will consider the charged off amount as income and may cause the customer financial hardship by requiring the customer to pay income taxes on this amount, could the lender be held liable for indirectly 'causing' this financial hardship?

Conversely, is there any way that the lender can charge off the account and delay the issuance of the 1099-C (perhaps until the customer's active duty period ends) in order to avoid indirectly 'causing' any hardship.

I personally think:
1) The lender cannot be held liable for any indirect hardship caused by the charge-off and subsequent issuance of the 1099-C.
2) The lender may get into more trouble by not taking the charge-off in accordance with their set policies/procedures and/or delaying the issuance of a 1099-C.

I would appreciate the opinions of others to place my mind at ease.

Thank you...

A charge off is an accounting decision and not necessarily an IRS 1099-C issue. Under the scenario you described, I would not file the 1099-C unless you truly forgave the borrower for the balance. In fact, the IRS rules on the 1099-C reporting says you don't report until you've gone 3 years with no activity on chargeoffs. Take another look at your 1099-C reporting process and that should take care of your concern.

Let's say 3 years with zero payments did result in the 1099-C. Did you create a hardship? No way. The law says drop the interest rate. It doesn't say the service person can skip payments. File the 1099-C. Better yet, get a hold of this person's CO. Failure to take care of debt obligations is grounds for dishonorable discharge from the military.

how far back must an agency go back and adjust interest, fees, and penalties? Is there a statute of limitations?

How far back, in what context?

1) To the date of active duty is the bottom line date.
2) If you are notified now of a request for relief under SSCRA which began 5 years ago, I think you'd still refer to 1 above. I haven't seen a statute of limitations date in the law, but if this is your situation, a call to counsel may be in order so you know your direction is correct.

Let us know what you find out if this is the case.