SCRA relief on a credit card: 6% for all transactions?

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Question:

My bank just received an SCRA request for rate relief on a customer’s credit card line. The card normally has a 22.99% interest rate, so 6% is a big drop! How do we do it? Is it only on existing balances up to this point, or does it need to remain at 6% for all past and future transactions, until his active duty ends?

Answer:

Credit card compliance is already complicated, but add in SCRA and it gets really complex! While the SCRA only requires relief on debt incurred prior to active duty, the practical reality is that you likely cannot parse it out correctly. How will you determine which charges to apply to which rate (for example, authorization date or posting date)? Can your system accurately produce statements and payments based on two different interest rates? How will payments be allocated (will payments pay off the 6% debt first while allowing the 22.99% rate on new purchases to add up)? In reality, while it is indeed a sizeable interest rate reduction, it is easier and likely lest costly to simply reduce the entire line’s rate to 6% for the duration of the relief period – including current and future charges during that time. Don’t forget, however, that the 6% rate is all-encompassing. You must turn off all fees too, otherwise the total paid by the servicemember will exceed 6%.
This isn’t all you need to know for credit card compliance!

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Learn more about Rebekah Leonard’s Credit Card Compliance: Lots of Rules! webinar.