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Summer 2019 Newsletter
Servicemembers Civil Relief Act
The Servicemembers Civil Relief Act (SCRA), 50 U.S. Code §§3901-4043, provides certain protections and benefits to military servicemembers and their families. Among these is a 6% limit on the amount of interest that can be charged on loans taken out by a servicemember or the servicemember and his/her spouse jointly before joining the military. Upon notice from the servicemember and proper documentation of active military service, the creditor is required to forgive interest in excess of 6% for the duration of the servicemember’s active duty and up to a year thereafter for mortgage loans.
Recently, the Department received a consumer complaint alleging that a Consumer Loan Act (CLA) licensee had, upon sufficient notice from a servicemember, declined to forgive interest above 6 percent. The wife of the servicemember had received a loan offer in the form of a negotiable check in her maiden name. Depositing the check resulted in a loan for the amount and under terms set forth in the offer that included interest in excess of 6 percent. The spouse endorsed the check and deposited it into a bank account in her name but from which she paid family expenses and bills.
The husband subsequently joined the military, and sometime thereafter the couple provided notice and documentation of active duty service to the creditor and requested an interest rate forgiveness pursuant to the SCRA. The creditor, however, declined the request with the apparent reasoning that the servicemember’s name was not on the loan documents therefore the loan was not taken out “jointly.” Washington, however, is a community property state. Debts incurred during the marriage are presumed to be joint obligations unless there is clear and convincing evidence that the debt was incurred separately and was not used for the benefit of the community.
The Department takes the position that this presumption applies to the SCRA and that a community debt can be a joint debt for purposes of the SCRA even if the servicemember did not personally sign the loan documents. The United States Supreme Court has recognized that the SCRA “is always to be liberally construed to protect those who have been obligated to drop their own affairs to take up the burdens of the nation.” Boone v. Lightner, 319 U.S. 561, 575 (1943). The Department agrees and stands in full support of Washington’s servicemembers.