Reservist Past Due Prior to Active Duty

Posted By: OnTheEdge

Reservist Past Due Prior to Active Duty - 02/10/20 05:27 PM

We have a Reservist who was past due on 2 loans prior to providing us with his orders. His order were dated Oct 19, 2019. Although he only presented those orders to us last week, we went back and reversed any late fees and applied those to principal. His payments are due on the 9th of the month but he always pays the last day of the month. He will be past due on both of these loans again before he is deployed next month. Would it be appropriate for us to offer him a 60 day extension? He would have to pay interest for 60 days and get the loans back on track.
Posted By: OnTheEdge

Re: Reservist Past Due Prior to Active Duty - 02/10/20 08:20 PM

Well based on my on research, I am going to say no extensions:

No Adverse Actions Permitted by Creditor Following Exercise of Rights Under SCRA When a servicemember requests any protections under the SCRA, a creditor may not use that as a reason for determining the servicemember to be in default, denying or revoking credit, changing the terms of an existing credit arrangement, refusing to grant credit in substantially the same amount, terms, or submitting an adverse credit report to a credit reporting agency. SCRA 518 (Plain English - Below is actual regulation)

§ 518. Exercise of rights under Act not to affect certain future financial transactions [Sec. 108] Application by a servicemember for, or receipt by a servicemember of, a stay, postponement, or suspension pursuant to this Act in the payment of a tax, fine, penalty, insurance premium, or other civil obligation or liability of that servicemember shall not itself (without regard to other considerations) provide the basis for any of the following: (1) A determination by a lender or other person that the servicemember is unable to pay the civil obligation or liability in accordance with its terms. (2) With respect to a credit transaction between a creditor and the servicemember— (A) a denial or revocation of credit by the creditor; (B) a change by the creditor in the terms of an existing credit arrangement; or (C) a refusal by the creditor to grant credit to the servicemember in substantially the amount or on substantially the terms requested. (3) An adverse report relating to the creditworthiness of the servicemember by or to a person engaged in the practice of assembling or evaluating consumer credit information. 9 (4) A refusal by an insurer to insure the servicemember. (5) An annotation in a servicemember's record by a creditor or a person engaged in the practice of assembling or evaluating consumer credit information, identifying the servicemember as a member of the National Guard or a reserve component. (6) A change in the terms offered or conditions required for the issuance of insurance.
Posted By: Andy_Z

Re: Reservist Past Due Prior to Active Duty - 02/14/20 09:59 PM

I will take the approach that says you can offer an extension or payment date change if that helps the SM pay on time. Adverse action in my mind is more of having a payment date that doesn't work for the SM and actually forces them to prepay in order to avoid late fees and derogatory credit reporting.

Also, the late fees should have been reversed and if they were accrued while protected under the SCRA and then paid, offered back to the SM. You have in effect required them to pre-pay if the loan if it was current with the payment. If they elected to have the funds paid against principal that would be different. But don't collect money as a late fee and keep it as a principal reduction if based on the amort it wasn't due. Late fees shouldn't be collected while the loan is past due in this this case. From a UDAP perspective collecting the late fee while principal is past due causes more simple interest and would be a form of pyramiding.

I assume the SM is paid at the end of the month, or that is the date that works for them if they're paid twine a month. I'd offer an extension to accommodate the SM's pay schedule. I'd feel better if they had direct deposit and said just pull it from there but that isn't always an option. Again, a due date change will reduce interest expense and help preserve the SMs credit rating.
Posted By: OnTheEdge

Re: Reservist Past Due Prior to Active Duty - 02/18/20 08:45 PM

Andy, thanks for your input. I will pass it along.