Arthur Hadley has been a sergeant in the US Army for five years.  He has been stationed at an Army base in the US for the last three years.  At a local bank, he has a car loan with two years remaining on its term and a credit card with a $1,200 balance.  Both obligations were incurred after he entered into active military duty.  Arthur has received word that his unit is being sent overseas.  He informs the bank officer he would like to have his car loan stayed until he returns.  He would also like to have his credit card balance stayed with no payments due until he returns.  What is the bank required to do?

A. The bank must stay the installment loan payment obligation.

B. The bank must stay the credit card payment obligation.

C. The bank must stay both the installment loan and credit card obligations.

D. The bank is not required to stay either obligation.

D. The bank is not required to stay either obligation.

SCRA: 50 USC Appendix Sections 518-538

The law does not require a bank to stay any obligations.  The bank cannot foreclose or obtain a default judgment without a court’s approval when the borrower is in the military, but there is no requirement to stay an obligation.

Eleanor is an advertising account executive.  She is also a pilot in the Air Force reserve.  She has a car loan with a five-year term at a 9% interest rate and a credit card with a $5k balance at 12% annual interest.  Her unit has been activated, and she will be leaving for military service.  Her military pay will be less than half her civilian pay.  She writes to the bank and asks that the bank lower her interest rates on the credit card and car loan for the duration of her service to 6%.  She asks for her monthly car payment to be lowered also.  She sends along proof of her activation and military pay scale.  What does the bank have to do?

A. The bank must lower the credit card and car loan interest rates but does not have to lower the car payments.

B. The bank must lower both rates, and the car payment must be lowered to account for the new interest rate.

C. The bank has to lower only the credit card interest rate.

D. The bank does not have to do either.

B. The bank must lower both rates, and the car payment must be lowered to account for the new interest rate.

SCRA: 50 USC Appendix Section 527

The SCRA rate cap provision covers these debts because Eleanor entered into both of them before her military service.  The bank also is required to lower her payments to account for the forgiven interest.  The bank has the option of asking a court to give it some protection from this request, but if Eleanor’s income is substantially reduced by her military service, the court will not protect the bank from this request.

Robin defaulted on her car loan at the bank.  The bank sent several reminder letters and, finally, a demand for payment.  The last letter said that if she did not pay, the bank would repossess the car.  Before its repossession, Robin joined the Marines.  She sent the bank a notice that she was now in active military duty and asked the bank to forbear taking any further actions against the collateral.  What can the bank do?

A. Proceed with self-help repossession of the vehicle since she had already been notified of the default before joining the marines.

B. File a petition with a court of competent jurisdiction and ask for permission to repossess the car

C. Ask Robin’s commanding officer for permission to repossess the car

D. Repossess the car but don’t sell it until Robin’s military service is over

B. File a petition with a court of competent jurisdiction and ask for permission to repossess the car

SCRA: 50 USC Appendix Sections 523-534

The bank’s only alternative, other than to do nothing, is to ask a court for permission to allow the bank to repossess the car.  The court will have to consider whether Robin’s rights can be adequately protected in light of her military service and may not allow the bank to gain possession of the car.  However, the bank should consider reputation risk before taking any action.

Martina had an individual car loan at the bank.  She makes monthly payments of $525 and has three years left on the term.  She informs the bank that her husband’s US Navy Reserve unit has been activated, and he will be gone for an indefinite period of time.  His annual income will now be much less than it was previously.  Martina asks the bank to lower the interest rate on this loan to 6% and lower the payments accordingly.  Does the bank have to comply with this request?

A. Yes.  If Martina can prove that her husband’s military service materially affects her ability to repay the loan, the bank must lower the interest rate and the payments.

B. No.  Unless Martina herself is undertaking military service, the bank is not under any obligation to make an accommodation on the payments.

C. Yes, but only if Martina agrees not to drive the car during the duration of her husband’s military service.

D. No.  Unless her husband makes the request, the bank does not have to comply.

B. No.  Unless Martina herself is undertaking military service, the bank is not under any obligation to make an accommodation on the payments.

SCRA: 50 USC Appendix Section 527

The interest rate cap is a protection extended only to loans made by the servicemember or jointly by the servicemember and spouse.  In this case, the loan is made only to the spouse.

Stacy is in the Army Reserve.  She had just heard that her unit is being activated, and she will be leaving the country for an indefinite period of time.  Her salary in the Army will be close to the salary she has in civilian life.  What options does she have under the SCRA to improve her financial situation before she leaves?

A. Ask the bank to lower the rate on her installment loan

B. Request a mandatory freeze on the rent she must pay for her apartment

C. Ask her credit card company to suspend charging interest pending her release from active service

D. Apply for assistance from a special SCRA fund that can cover interest payments while she is on active duty

A. Ask the bank to lower the rate on her installment loan

SCRA: 50 USC Appendix Section 527

Of the options presented, asking the bank to lower the rate on her installment loan is the only option specifically afforded to Stacy under the SCRA.

To what amount must a bank limit interest on debts under SCRA unless otherwise determined by a court?

A. A rate, specified by military counsel, base on the servicemember’s financial condition at the time of call to active duty

B. The Wall Street Journal’s Prime Rate in effect at the time of the servicemember’s call to active duty

C. 6% for all accounts made prior to the servicemember’s call to active duty

D. The amount needed to fully amortize the debt while the servicemember is on active duty

C. 6% for all accounts made prior to the servicemember’s call to active duty

SCRA: 50 USC Appendix Section 527

Which of the following is not considered a covered borrower?

A. An active member of the national guard

B. A 20-year-old college student who is the son of an Army sergeant

C. The ex-wife of an active Navy servicemember

D. The mother of a Marine serving overseas who lives with her son’s family

C. The ex-wife of an active Navy servicemember

SCRA: 32 CFR 232.3(c)

The ex-wife of a servicemember is no longer a dependent, so she is not covered.

Which of the following is NOT a required disclosure for an income tax refund anticipation loan to a servicemember?

A. The military annual percentage rate (MAPR)

B. The APR

C. A description of each of the events of default

D. A list of all the fees included in the MAPR

C. A description of each of the events of default

SCRA: 32 CFR 232.6(a)

The disclosures required by A and D are specifically required by this regulation.  The APR is required by this regulation and by Regulation Z.

ABC Lender s located in a state with a consumer protection law requiring lenders to limit the APR on vehicle title loans to 24%.  Which of the following is true for ABC Lender?

A. ABC must abide by the state law and limit its vehicle title loans to 24% to servicemembers

B. The federal regulation preempts state law and ABC may charge up to 36% since it is governed primarily by state law

C. ABC has a choice of law; it may choose either the federal law regulations or the state law

D. ABC may charge up to 36% for nonservicemember borrowers

A. ABC must abide by the state law and limit its vehicle title loans to 24% to servicemembers

SRCA: 32 CFR 232.6

The lender is required to abide by state law since it provides more protection to the borrower.