Question:

Hey Heather!

We have a member currently serving full time in the US Army. He just got orders for an overseas deployment and will be leaving on the 26th of this month. He currently has a signature loan and an auto loan with the credit union. Is this when we lower his rate to 6% and keep it that way for the duration of his six-month deployment? I’m so confused by the way the Servicemember’s Civil Relief Act reads saying it applies when a servicemember is called to “active duty”… he’s already been active duty prior to receiving overseas orders for deployment because it’s his job.

Help please!

Answer: 

This gets a bit tricky with career military folks.  And the servicemember themselves might not fully understand how the rate reduction protection works. I’m going to link to relevant definitions in the Servicemembers Civil Relief Act (SCRA).

Interest Rate Limitation

(a)Interest rate limitation

(1)Limitation to 6 percent

An obligation or liability bearing interest at a rate in excess of 6 percent per year that is incurred by a servicemember, or the servicemember and the servicemember’s spouse jointly, before the servicemember enters military service shall not bear interest at a rate in excess of 6 percent—

(A)during the period of military service and one year thereafter, in the case of an obligation or liability consisting of a mortgage, trust deed, or other security in the nature of a mortgage; or

(B)during the period of military service, in the case of any other obligation or liability.

So now we need to know what “military service” is, so we know when it starts and ends. 

Military Service

 (2)Military service

 The term “military service” means—

(A)in the case of a servicemember who is a member of the Army, Navy, Air Force, Marine Corps, or Coast Guard—

(i)active duty, as defined in section 101(d)(1) of title 10, and

 (ii)in the case of a member of the National Guard, includes service under a call to active service authorized by the President or the Secretary of Defense for a period of more than 30 consecutive days under section 502(f) of title 32 for purposes of responding to a national emergency declared by the President and supported by Federal funds;

 (B)in the case of a servicemember who is a commissioned officer of the Public Health Service or the National Oceanic and Atmospheric Administration, active service; and

(C)any period during which a servicemember is absent from duty on account of sickness, wounds, leave, or other lawful cause.

Since this is a servicemember (not a member of the National Guard, PHS, NOAA or a wounded servicemember) we now need to know what “active duty” means in USC 101(d)(1).

Active Duty

(d)Duty Status.—The following definitions relating to duty status apply in this title:

(1)The term “active duty” means full-time duty in the active military service of the United States. Such term includes full-time training duty, annual training duty, and attendance, while in the active military service, at a school designated as a service school by law or by the Secretary of the military department concerned. Such term does not include full-time National Guard duty.

If your member has been in training or otherwise servicing in the military, it’s likely he has been on active duty for a while now.  Being deployed away from your home base DOES NOT trigger SCRA protections, being on “active duty” does. For servicemembers (not national guard members) that includes “full-time training” (like boot camp) as well as “active military service.”  If your member took out the loans with the credit union while he was in military training or serving locally, the SCRA will not apply.  The SCRA only applies to “pre-service debt,” that is debt he incurred prior to joining the military.

You can also ask your member to clarify when his “active duty” (as defined by USC 101(d)(1)) began. Part of his obligation to the credit union when asking for interest rate relief is to provide the credit union with specific information:

(A)In general

Not later than 180 days after the date of a servicemember’s termination or release from military service, in order for an obligation or liability of the servicemember to be subject to the interest rate limitation in subsection (a), the servicemember shall provide to the creditor written notice and a copy of—

(i)the military orders calling the servicemember to military service and any orders further extending military service; or

 (ii)any other appropriate indicator of military service, including a certified letter from a commanding officer.

So make sure you have one or the other.  Often, these orders include the date when active duty status began. You can also look up your member’s information on the DMDC database.  It might give you information on his active duty status.