Compliance Question of the Week

Under the Servicemember’s Civil Relief Act (SCRA), after reducing the interest rate to 6%, does the credit union have to lower the amount of the payments or can it just lower the number of payments?

The credit union must lower the amount of the payments. The law states that the amount of any periodic payment due from a servicemember under the terms of the instrument that created an obligation for liability must be reduced by the amount of interest forgiven that is allocable to the period for which the payment is made. The reasoning for this is because if the credit union only reduced the number of payments and not the payment amount, the servicemember would not receive the benefit of the 6% during active duty. Therefore, a credit union will not be in compliance with the Act if it reduces the number of payments rather than reducing the payment amount.

Related Links:

SCRA Section 207(a)(3)

 

Questions? Contact the Compliance Hotline: 1.800.546.4465, compliance@nwcua.org.

Posted in Compliance.