Deal Pack Blog
The Service Member’s Civil Relief Act (SCRA): What it means for the BHPH and LHPH industry
Formerly known as the Soldier’s and Sailor’s Civil Relief Act, the Service Member’s Civil Relief Act (H.R. 100) was signed into law in its current version by President Bush in 2003. This law is meant to protect service men and women due to a potential change in financial status upon joining the military or being called into active service from the reserves. There are three main areas of this law that affect the BHPH and LHPH industry: Interest rate limitation, repossession for breach of a retail installment contract and the termination of motor vehicle leases.
INTEREST RATE LIMITATION:
According to Section 207, maximum rate of interest on debts incurred before military service, it is VERY important to remember this applies to debts incurred BEFORE military service. If this is the case, then the service member must provide a written notice and a copy of their military orders to the creditor. Upon receipt of the written notice and orders, the interest rate must then be reduced to no more than 6% for the duration of their military service.
RETAIL INSTALLMENT CONTRACTS:
According to Section 302, protection under installment contracts for purchase or lease, the service member is protected from repossession of their vehicle, resulting from a breach of contract. This means if they don’t pay, you’ll need to get a court order to repossess the vehicle. Even if the court grants you the repossession, you may be refunding the customer a portion or all of their payments.
“The court (1) may order repayment to the servicemember of all or part of the prior installments or deposits as a condition of terminating the contract and resuming possession of the property;”
According to Section 305, termination of residential or motor vehicle leases, the lessee may terminate the lease upon entering military service or, if the lease was entered into after beginning service, upon receipt of new orders for a permanent change of duty station or a deployment of at least 180 days. The lessee is required to provide the vehicle leasing company a written notice of the intent to terminate the lease, along with a copy of their military orders, and return the vehicle no more than 15 days after providing the notice.
Regarding charges for early termination of a motor vehicle lease: “the lessor may not impose an early termination charge, but any taxes, summonses, and title and registration fees and any other obligation and liability of the lessee in accordance with the terms of the lease, including reasonable charges to the lessee for excess wear, use and mileage, that are due and unpaid at the time of termination of the lease shall be paid by the lessee”.
For questions concerning how this law has been interpreted by your state, the potential effect on your business, and your legal rights as a creditor, I recommend you consult your attorney. For a look at the actual law, you can visit the following website (which is where I gathered the research for this blog):