SCRA Compliance Summary

Maintaining compliance with the various laws and regulations that govern the fintech and lending industries can be tricky. At LoanPro we care about our customers’ compliance needs, so we’ve summed up the main requirements for a number of regulations. This is the first in a series of compliance summaries that will include both information about the regulation and how LoanPro can help you to maintain compliance.

Introduction

The Servicemembers Civil Relief Act offers certain protections to active duty military members and their dependents in regards to their loan and lease obligations. It can sometimes be tricky to follow its requirements when a borrower that didn’t previously qualify for SCRA protections lets you know that that’s changed. Here’s is a quick summary of the SCRA’s main requirements (as it pertains to creditors) and how LoanPro can give you a leg up in remaining compliant.

SCRA Requirements

• Application or receipt of a stay, postponement, or suspension in the payment of a fine or penalty can’t be taken as a determination that the servicemember is unable to pay their obligation according to its terms or be the basis of any negative action (such as a revocation of credit or a change in terms).
• Fines and penalties incurred by the servicemember during their service may be reduced or waived if their ability to perform the obligation was materially affected by their military service.
• Any credit obligation of a servicemember is limited to an interest rate of 6% for the duration of their active duty military service (and up to one year after in regards to mortgages).
• If a borrower with pre-existing obligations notifies their lender(s) that they are now active duty military, a lender is required to forgive any interest in excess of 6%. Their payments should be reduced by the amount forgiven (acceleration of the principal by keeping the payment amount the same is not allowed).
• In order to implement the SCRA limitations, a servicemember has to give a written notification to the creditor along with a copy of orders calling them to military service.
• Limitations are effective as of the date of the order to active duty.
• Installment contracts or leases (such as for a vehicle) cannot be rescinded or terminated for a breach of terms occurring before or during the borrower’s military service. The property in question cannot be repossessed without a court order.
• Under the SCRA, a servicemember can terminate a lease at any time during their service. This applies to any obligation a dependent might have had under the lease.

LoanPro Solutions

• LoanPro’s Comprehensive Loan Recasting allows you to ensure your loans meet the SCRA interest rate and payment requirements, even after the fact.
• Fines and penalties applied to an account can be easily modified or removed if required.
• Keep a record of a servicemember’s service orders and written notification by saving an electronic version to Customer Documents.
• LoanPro’s Audit Trail feature will allow you track all actions taken on an SCRA loan.
• Walkthroughs that will take your agents through the exact process they should follow if a lease is terminated early.

Highlight: LoanPro has an integration that allows our customers to verify SCRA qualification by checking the Department of Defense database and retrieve information including active duty date, time frame, and relevant documentation. This also allows our customers to monitor whether borrowers have been deployed with periodic checks to the database. LoanPro will automate all necessary SCRA adjustments, including communications and loan rates.