I know there has been a lot of discussions on this subject already, but now that we are starting to comply with the Act for our customers the subject of vehicle leases came up. We have a customer who was delinquent before he went on active duty and he decided to give up the vehicle instead of continuing with the payments. There are fees involved with you give up a lease before maturity. How will be handle the delinquency and related fees?

DCollins: I believe that all active duty military personnel are entitled to the protections of the SSCRA, including reduction of the interest rate and cancellation of fines and penalties. However, the interest rate reduction and fines and penalties get different treatment under the SSCRA.

INTEREST RATE

This reduction is automatic and it can be permanent during the period of active duty.

A lender always has the burden of proving that the active duty status didnt "materially affect" the service member's ability to pay the debt. If the lender cant meet this burden, then the interest reate is reduced to 6% during the period of active service.

see 50 Appx USC §526

CANCELLATION OF FINES AND PENALTIES

Unlike the reduction of the interest rate, this relief is not automatic. Fines and penalties cant accrue for failure to comply w/a contract unless a court has issued a stay w/respect to a service member's duty to perform the contract.

Therefore, a lender can ACCRUE late charges, fes associated with the early cancellation of a vehicle lease and other "penalties". Whether or not it can COLLECT them will depend upon whether a court relieves a service member from his/her duty to pay the late charges, etc..

Once again, it appears that the lender has the burden of proving that the service member's military duty didnt "materially affect" his/her ability to pay the "penalty".

Alternatively, it is possible for a lender to collect late charges, etc. only to have a court subsequently relieve the service member from their payment (ie. the lender will have to return the "penalty" already paid).

see 50 Appx USC §522

In you hypo, its hard to see how the service member could win argiung that his/her active duty status prevented him/her from performing under the vehicle lease. S/he had already admitted s/he couldnt keep up w/the payments before active duty began. However, a court could find that his/her active duty status does prejudice the ability to pay the fees that are now associated w/surrendering the vehicle and cancelling the lease.

I dont see a reason not to charge the fees; whether you'll ultimately collect them is another matter. If the fees are substantial, it may be worth a court fight. Otherwise, it will be the proverbial "cost of doing business".

I AM NOT ENGAGED IN PROVIDING LEGAL ADVICE AND THE VIEWS EXPRESSED ARE NOT THOSE OF MY EMPLOYER

Jeffp, Thank you for your response. It was helpful.

If your organization tries to collect this then you are firstly going to incurr further costs and secondly, and more importantly, could be painted as being unpatriotic and unsupportive of the American military if your customer gets that sort of lawyer.

I would think long and hard before attempting to collect this debt whatever legal advice you might get.

Please understand that I am not suggesting for a moment that your actions would be unjustified or unpatriotic simply that they could be portrayed in that light to the detriment of your institution.

Matthew