Servicemembers Civil Relief Act Policy
Be it resolved that it is the policy of [INSERT FINANCIAL INSTITUTION NAME] to maintain maximum compliance with the Servicemembers Civil Relief Act (SCRA) and other laws applicable to servicemembers and to ensure the ongoing, fair treatment of our customers serving in the military.
The Servicemembers Civil Relief Act of 2003 (SCRA) was signed into law on December 19, 2003, amending and replacing the Soldiers’ and Sailors’ Civil Relief Act of 1940. The law protects members of the Army, Navy, Air Force, Marine Corps and Coast Guard, including members of the National Guard, as they enter military service (active duty), as well as commissioned officers of the Public Health Service and the National Oceanic and Atmospheric Administration engaged in active service. Some of the benefits accorded servicemembers by the SCRA also extend to servicemembers’ spouses, dependents, and other persons subject to the obligations of servicemembers. Several sections of this law have recently been amended, extending the time period for certain activities.
The SCRA compliance program will comply with the following major relief provisions of the SCRA:
• Maximum rate of interest on loans, including mortgages;
• Residential and motor vehicle purchases and leases;
• Foreclosure and eviction from bank-owned property;
• Life insurance assigned as security;
• Adverse action; and,
• Relief for other obligors.
Bank personnel extending and servicing credit-related products and services will be trained and familiar with the SCRA and the bank’s obligations.
SCRA compliance will be included in the bank’s audit scope and schedule. Audit or review findings will be communicated to the bank’s Board of Directors and senior management for tracking and correction.
This policy was approved by the Board of Directors of <INSERT FINANCIAL INSTITUTION NAME> on the <INSERT DATE>.
_________________________________ _____________________________________
Secretary President
Servicemembers Civil Relief Act
Procedures
Servicemember requests will be routed to [INSERT DEPARTMENT/TITLE], for review and authorization of the rate reduction. Communication of the decision to the borrower about the SCRA request will be made by [INSERT DEPARTMENT/TITLE].
• Maximum Rate of Interest on Loans:
Upon receiving a written request for relief and a copy of a servicemember’s military orders, the bank will reduce the interest rate on any loan covered under the Act incurred before entry into military service by the servicemember, or a servicemember and spouse jointly, to no more than 6% per year, inclusive of certain fees. The reduction will be retroactive to the first day of eligibility. Interest in excess of 6% is forgiven. Periodic payments will be adjusted appropriately.
In the case of a mortgage, trust deed, or other security in the nature of a mortgage, the interest rate reduction extends for one year after the end of the servicemember’s military service.
• Foreclosure, Eviction from Bank-Owned Property:
Real or personal property owned by a servicemember before the servicemember’s military service that secures a mortgage, trust deed, or similar security interest cannot be sold, foreclosed upon, or seized based on a breach of such a secured obligation during the period of military service or 12 months thereafter without a court order. This protection applies to loans disbursed prior to active duty and is automatic without the need to submit a protection request.
Before initiating any foreclosure on a home or repossession of a vehicle, the bank shall determine whether the property is owned by a servicemember covered by the SCRA. If, at any point during a foreclosure process, the borrower qualifies as a protected servicemember, the proceedings will stop.
A safe deposit box is considered leasehold in most states and, like any other lease, is protected under the SCRA. The bank cannot re-possess a safe deposit box rented to a servicemember for late payment without first getting a court order. Drilling a box for non-payment would equate to eviction.
• Residential and Motor Vehicle Purchases and Leases:
Contracts for the purchase of real or personal property, for which the servicemember has paid a deposit or made a payment before the servicemember enters military service, may not be rescinded or terminated after the servicemember’s entry into military service for a breach of the terms of the contract occurring before or during their military service, or the property repossessed because of the breach without a court order.
• Life Insurance Assigned as Security:
If a life insurance policy on the life of a servicemember is assigned before military service to secure the payment of an obligation, the assignee of the policy (except the insurer in connection with a policy loan) may not exercise, during the period of the servicemember’s military service or within one year thereafter, any right or option obtained under the assignment, absent compliance with a court order or other specified requirement.
• Adverse Action:
The following actions may not be taken on the basis that a servicemember applies for, or receives a stay, postponement, or suspension of his or her obligations or liabilities pursuant to the SCRA:
ü A determination that the servicemember is unable to pay the obligation or liability in accordance with its terms;
ü A denial, revocation of credit, change in terms of existing credit, or refusal to grant credit to the servicemember in substantially the amount or terms requested;
ü An adverse report relating to the creditworthiness of the servicemember to a consumer reporting agency;
ü A refusal by an insurer to insure the servicemember;
ü An annotation in a servicemember’s record, when evaluating consumer credit information, identifying the servicemember as a member of the National Guard or a reserve component; or
ü A change in the terms or conditions for the issuance of insurance.
Banker’s Compliance 800-847-1653