SSCRA defines “interest” to include service and renewal charges or any other fees or charges (except insurance) that are related to the obligation or liability. Can we still assess late fees? If so, are they considered interest with regard to the 6% cap?

Also, are we required to reamortize minimum monthly payments for credit card debt? There is no actual/contractual maturity date. Howeer, the minimum payment is derived using a revolving balance and an assumed amortization.

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Opinions expressed herein are my own and are not necessarily those of my employer.

Late fees are considered interest so if the debt is at 6%, late fees should be turned off.

As to the existing debt, the rate on that should go to 6% and the payments lowered accordingly. Charges after entering the service do not necessarily need to be at the reduced rate. At least that was our read years ago when we had a portfolio. Our system did not have the ability to use multiple rates though. So we reduced it all and left it at 6% until discharge.

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Andy Zavoina
Opinions stated are not necessarily that of my employer.

Is there any obligation to provide new truth in lending credit card disclosures when the interest rate is reduced when a person goes on active duty? Any suggestions on where to start researching this issue? Our current credit card disclosures are on the application and are for variable interest rates.

The thought process in the past was that this is an unforeseen event after the loan was done, it is a required modification by law and is in the consumer's favor. No new disclosures are required.

Certainly you could do them if desired. When the protection ends, you would again have to disclose, in my opinion, to take the terms back to the original agreement.

Also, be aware that new charges on a card, after entering the service, may not be protected under SSCRA. When we had our cards issued, we didn't have the capability of splitting out those charges, however, and gave them full benefit. But that was our system.

Thanks for your quick reply, Andy. I am not sure at this point whether our system will allow splitting out either. Another option I had considered, if we decide to charge the "normal rate" for charges made after active duty begins, would be to disable the ability to charge on the current card (with the 6% rate) and request an application for a new card for charges made during active duty (so as not to issue an unsolicited card). Do you have any thoughts on this?

If you requested a new application and issued a new card, I think you'd be increasing your workload and possibly asking a lot of the servicemember if they are deploying on short notice.

If you terminated use of the old card and issued a new one, the limit should not be reduced or that would be discriminatory and really bad PR. The limit on the new card would have to increase with each payment on the old card to keep the same exposure overall, or you could just increase the credit line in total. The new card would have to be equal to the old limit, effective doubling the exposure if the card is maxed out now.

And if they are really reducing their income by going active duty, increasing your total credit exposure isn't desirable from an underwriting perspective.

Again, Andy, thanks for your help. I hadn't thought of all of those things. Your insight on the matter is much appreciated!

Andy,
If Reg Z doesn't include late fees in finance charge, would you still consider late fees as interest?

Yes, from the SSCRA:
No obligation or liability bearing interest at a rate in excess of 6 percent per year incurred by a person in military service before that person's entry into that service shall, during any part of the period of military service, bear interest at a rate in excess of 6 percent per year unless, in the opinion of the court, upon application thereto by the obligee, the ability of such person in military service to pay interest upon such obligation or liability at a rate in excess of 6 percent per year is not materially affected by reason of such service, in which case the court may make such order as in its opinion may be just. As used in this section the term ''interest'' includes service charges, renewal charges, fees, or any other charges (except bona fide insurance) in respect of such obligation or liability.

Thanks for clarifying - TJ