SCRA Protection – recalculate payment or extend maturity

Compliance > Lending > Service Members > SCRA
Q: Does the bank have to recalculate the monthly payments to reduce the loan interest rate to 6 percent, or is it acceptable to extend the maturity date and provide the borrower with a new payment schedule?
 
A:  Section 527 of the SCRA requires both the forgiveness of interest in excess of 6 percent and the prevention of acceleration of principal. Therefore, the creditor should adjust the interest rate and reflect that reduction in the periodic payment. Any extension of the loan’s maturity date would not represent forgiving the interest.
 
 
ADDITIONAL INFORMATION – This Q&A was released by the Federal Reserve Board, in follow up to their Servicemember Financial Protection Webinar that was presented on September 10, 2012 - https://www.consumercomplianceoutlook.org/2013/first-quarter/servicemember-financial-protection-webinar/
 

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