SCRA Enhancement and Improvement Act Suggests Capping Interest Rates to 3 Percent for Troops

military man saving money
Sen. Patty Murray, D-Wash, introduced the SCRA Enhancement and Improvement Act of 2016 this Thursday to cap the interest rates on all loans taken up by the troops to 3 percent and offer a few other benefits as well. The stronger and highly beneficial financial legal protections is proposed to be under an amended Servicemembers’ Civil Relief Act.



Furthermore, under the SCRA, military personnel are to get a 6 percent cap on the interest rate on all loans they take up before they enter active military duty. This applies to all loans and services personnel take either before joining the active duty or prior to becoming part of the Guard or Reserve as an active duty member.


According to the new legislation, all loans of the service members will be capped at 3 percent regardless of when they were taken. Similarly, service members who qualify for hostile fire pay or imminent danger pay will get zero percent interest rate caps. With this legislation in effect, it could mean that service members will not be charged more than 3 percent on any loans including but not limited to credit cards and mortgages. However, note that the legislation is still a proposal as of yet. It still has to go through a lot of steps before it becomes law. Many observers say it’s a long shot and might not materialize.


On the presentation of the legislation, one of the representatives of an organization of lawyers for the military community said, “I’m sure this is well-intended, but the rate seems awfully low.” The organization is in support of the benefits for military personnel including the 3 percent cap on interest rates.


According to Murray spokeswoman Kerry Arndt, the bill will ensure that the lenders do not decline credit calls of military member under the protection of SCRA. In addition, she thinks that the SCRA will save military members from predatory and unfair practices.


Senior member of the Senate Veterans’ Affair Committee and the top Democrat of the Senate Health, Education, Labor and Pensions Committee Murray, added that businesses have not always respected the Servicemembers’ Civil Relief Act protections, which is why the law needs to be more stringent. One of the recent examples of this is the fact the lenders overcharge military borrowers after the latter were called to active duty. Many lenders did not and do not reduce their rates in such instances.


“In recent years, we’ve seen our service members subjected to predatory practices and unfair treatment on several fronts, from overcharges on their student loans, to foreclosures on their homes when they’re deployed. That is simply unacceptable,” added Murray while announcing the new changes.


In addition, the SRCA would also require lenders of federally granted student loans to comply with the new interest rates caps and offer top customer service to military personnel. The lender or the service provider will also need to have special representatives for military personnel or a special point of contact so that better services are provided.


Note that the SRCA also dictates that any service member who dies in the line duty will have his or her loan written off. Other expanded protections include prohibiting lenders from prepayment penalties if a mortgage is paid off early due to reasons such as permanent change of station move. Service members will also be able to cancel cable TV and internet contracts in the case of permanent change of station moves. As of now, these protections are only offered for auto leases, cellphone contracts and residential leases.



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