SSCRA: Civil Relief For The Military

For more information on the SSCRA, including a link to the Act, use the BOL SSCRA page.
Now that members of the military and the reserves are being placed on active duty because of the new war on terrorism, financial institutions must pull out and dust off the Soldier's and Sailor's Civil Relief Act. This generally hasn't seen the light of day since the Desert Storm effort of 1993. As a result, many financial institution staff members have forgotten its provisions.

The OCC recently distributed and Advisory Letter, AL 2001-10, to update financial institutions on the important provisions of the SSCRA. The Advisory Letter outlines the key provisions and compliance requirements of the SSCRA.

The best-known or most visible provision of the SSCRA is the requirement to adjust the borrower's interest rate to no more than 6%. In the present market, a drop to 6% is not usually a large drop from the current rate. However, the SSCRA applies to open-end credit, such as credit cards, as well as closed-end credit. For some credit card issuers, the interest rate reduction may be significant.

There is another trick to adjusting the rate for credit cards. Several fees, such as the annual member fee, which are not finance charges for purposes of Regulation Z's APR, must be included in the calculation of the 6% rate for purposes of SSCRA. One simple way to deal with this is to use a rate of 6% and waive all other fees.

The rate reduction is intended to make the credit more affordable for military while on active duty and experiencing reductions in pay or difficulties in making regular payments.

Copyright © 2001 Compliance Action. Originally appeared in Compliance Action, Vol. 6, No. 13, 11/01