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#901706 - 02/07/08 08:33 PM National Guard requirements for interest rate cap
Christina the Auditor Offline
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Joined: Sep 2006
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I'm doing a review of our loans subject to SCRA. I have one situation for which I haven't been able to find a clear answer. I've done a few searches on this topic, but I am still confused as to the requirements under the SCRA for National Guard members.

Scenario:
A member of the National Guard brought us (in Fall 05) orders under Title 10.

Active duty orders = 8/15/05
New loan = 10/4/05
Effective date (home station) = 10/9/05
Effective date (mobilization station) = 10/14/05
Period: 608 days

We have an older loan that was originated on January 1, 2005 that the customer is still paying. At what date should we have reduced the rate to 6% on the older loan? Also, is the loan dated 10/4/05 subject to the rate cap?

In my mind, we need to base everything off the 8/15/05 date. Thanks for your help!

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#901784 - 02/07/08 09:31 PM Re: National Guard requirements for interest rate cap Christina the Auditor
Dan Persfull Online
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(a) RESERVES ORDERED TO REPORT FOR MILITARY SERVICE- A member of a reserve component who is ordered to report for military service is entitled to the rights and protections of this title and titles II and III during the period beginning on the date of the member's receipt of the order and ending on the date on which the member reports for military service (or, if the order is revoked before the member so reports, or the date on which the order is revoked).

As I read this they become eligible for the reduction upon receipt of the orders, but not once they report. IOWs once they report they are no longer eligible for the reduction for any loans made after that date. If they did not report until 10/9 then IMO the loan made on 10/5 is subject to the reduction. The old loan is subject to reduction as of 8/5.
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#965620 - 05/28/08 03:26 PM Re: National Guard requirements for interest rate cap Dan Persfull
goingtoexperts Offline
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Hi Dan,

I am a little confused. If active duty begins for reservists on the date the member receives the orders, then why would the 10/04/05 qualify for the rate reduction? The loan was established after the service member was called to active duty on 8/15/05. TY!

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#965690 - 05/28/08 04:25 PM Re: National Guard requirements for interest rate cap goingtoexperts
Dan Persfull Online
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Active duty does not begin on the date they receive their orders, they become eligible for the protective coverage of the SCRA for their existing loans once they receive their orders, and they continue to be eligible for coverage on their existing loans and any new loans they get BEFORE reporting for active duty. Once they report for active duty they are no longer eligible for the coverage because any loan they get after reporting are post active duty loans.

In the above case the servicemember became eligible for the protective coverage of the SCRA on 8/15 (the date they received their orders), they got a new loan on 10/04 and reported for active duty on 10/9. All loans obtained before 10/9 are eligible for the SCRA's protective coverage because they are "pre"-active duty loans. Any post-active duty loans are not eligible for the protective coverage of the SCRA.
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#965732 - 05/28/08 05:13 PM Re: National Guard requirements for interest rate cap Dan Persfull
goingtoexperts Offline
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Thanks Dan. So a reservist can receive active duty orders and any loan taken out after the orders are received and before the active duty period officially starts would qualify for the rate reduction. What about enlistees? When does active duty start for enlistees?

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#965893 - 05/28/08 08:05 PM Re: National Guard requirements for interest rate cap goingtoexperts
Dan Persfull Online
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Their active duty status would start on the date they report to their duty station.
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#1074111 - 10/30/08 10:53 PM Re: National Guard requirements for interest rate cap Dan Persfull
RebekahL CRCM Offline
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RebekahL CRCM
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Sorry to join this party so late, but I'm very confused and need clarification!

In http://www.bankersonline.com/compliance/ci-scra1.html writen by Mary Beth, one of the questions about halfway down is:

"Question: Does the pre-existing debt rule begin on the date the individual enters the military service or the date s/he is called to active duty? Or is that pervceived to be the same date?"

"Answer: Military service is deemed to begin when the person receives their orders, rather than the date the servicemember must actually report for duty. This is good news for creditors. If it were written differently, a person could receive their orders, go run up debt, then seek to have the rate lowered once they reported for active duty. Since military service is deemed to begin when the person receives his orders, this is not possible."

This seems to contradict what Dan was explaining. Help!!
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#1081222 - 11/13/08 04:49 PM Re: National Guard requirements for interest rate cap RebekahL CRCM
Andy_Z Offline
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There is a definitional difference between someone called to active duty, and someone who joins. A reservist called to active duty is protected when they receive their orders. Someone who joins is protected when they are on the payroll so to speak.

This is under Sect. 516, as opposed to 511:

A member of a reserve component who is ordered to report for military service is entitled to the rights and protections of this title and titles II and III during the period beginning on the date of the member's receipt of the order and ending on the date on which the member reports for military service (or, if the order is revoked before the member so reports, or the date on which the order is revoked).

http://www.bankersonline.com/regs/201/sscra.html
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#1923539 - 05/15/14 06:55 PM Re: National Guard requirements for interest rate cap Christina the Auditor
Tesla Offline
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I am little confused.
If the reservist got his loan 5/3/12. Reported for military service on 4/2/13 and provided a copy of Orders to us on 4/11/2013, are you saying his protection only ran from 5/3/12-4/2/2013 or are you saying there is no protection available after 4/2/13, but the 5/3/12 loan is protected until he ends his service?
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#1923554 - 05/15/14 07:26 PM Re: National Guard requirements for interest rate cap Christina the Auditor
Dan Persfull Online
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The complete text to 516(a):

(a) RESERVES ORDERED TO REPORT FOR MILITARY SERVICE- A member of a reserve component who is ordered to report for military service is entitled to the rights and protections of this title and titles II and III [sections 511 to 515, 516 to 519, 521 to 527, and 531 to 538 of this Appendix] during the period beginning on the date of the member’s receipt of the order and ending on the date on which the member reports for military service (or, if the order is revoked before the member so reports, or the date on which the order is revoked).

If you make the reservisit a loan between 5/3/12 and 4/2/13 once he reports for duty on 4/2/13 that loan is subject to the 6% rate cap (Sec. 527). Any loan made on or after 4/2/13 and within the duration of his active duty would not be subject to the 6% rate cap.
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The opinions expressed are mine and they are not to be taken as legal advice.

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#1923592 - 05/15/14 08:14 PM Re: National Guard requirements for interest rate cap Christina the Auditor
Andy_Z Offline
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Generally, the rate changes effective the date of the orders (reservist) or the date of going active duty (someone enlisting) and that loan changed to 6% stays at 6% until paid or service ends.
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AndyZ CRCM
My opinions are not necessarily my employers.
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Rules and Regs minus Relationships equals Resentment and Rebellion. John Maxwell

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#1923611 - 05/15/14 08:49 PM Re: National Guard requirements for interest rate cap Christina the Auditor
Tesla Offline
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Thank you both. I think I understand now.
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