Summary
|
 Lending
to members of the US armed services differs in at least two respects from
civilian lending
- Statutorily, persons entering into or already on
active duty are entitled to certain protections of the
Servicemembers' Civil Relief Act (2003) which updated the former Soldiers'
and Sailors' Civil Relief Act (1940);
- By Department of Defense regulations,
the extension of "consumer credit" (in particular payday, vehicle title and tax
refund anticipation loans) to "covered persons" (active duty members of the
armed forces and their dependents) is subject to restrictions including maximum
total interest and fees as a percentage of the credit effective 10.01.07
|
Statute
|
Servicemembers'
Civil Relief Act 2003
 Statutory
Protections
- Service member must show that military service
has had a "material effect" on the legal or financial matter at issue
- Protection extends to dependents for certain
matters such as evictions
- Most protections are not automatic; it must be
invoked while service member is on active duty or within 30 to 180 days
afterwards (depending upon the protection invoked)
 Covered
Situations
- Reduction of pre-service consumer debt and
mortgage interest rates to not more than 6%
- Delay of court or administrative hearings
- Termination of real estate and automobile leases
- Protection from eviction for nonpayment of rent
- Setting aside or reopening of default judgments
- Life insurance premium protection
- Not subject to state taxation if present in the
state only by reason of military duty
- Reinstatement of health insurance benefits after
separation from service
|
Regulations
SEC_CODE_REF_0090001192884
- Until the regulations are available in the CFR
(32 CFR 232) the following link is to the regs at
72
FR 50580 along with the OTS explanation letter
Scope
of the regulations in general
- Applies to certain defined extensions of
closed-end credit consumer credit
- Particularly aimed at payday loans, vehicle title
loans and tax refund anticipation loans
- Does not apply to residential mortgages or any
credit transaction to purchase or lease personal property (including
automobiles) where the credit is secured by the property being purchased or
leased
- Imposes limits on the combined total amounts of
interest and fees
- The regulations set a maximum Military Annual
Percentage Rate ("MAPR") of 36%
- The MAPR is NOT the same as the Reg Z APR and it
includes all fees and charges in connection with the transaction
- Provides for consumer disclosures
- Covers active duty members of the armed forces,
their spouses or children and other persons for whom the armed forces member
provided more than 50% of such persons support
32
CFR Part 232 - Department of Defense
- 232.1 Authority, purpose and coverage
- 232.2
Applicability
- 232.3 Definitions
- 232.4 Terms of consumer credit extended to
covered
borrowers
- 232.5 Identification of
covered borrower
- 232.6 Mandatory loan
disclosures
- 232.7 Preemption
- 232.8 Limitations
- 232.9 Penalties and remedies
- 232.10 Servicemembers Civil
Relief Act protections
unaffected
- 232.11 Effective date and
transition
|
|
