The Servicemembers Civil Relief Act of 1940 protects military personnel during their term of active service from undue financial burdens. The Act can help service members with debt and mortgage interest rates and civil litigation such as repossession of property, bankruptcy, foreclosure and other such actions. One of the most significant provisions under the Act limits the amount of interest that may be collected on debts of persons in active military service to 6% per year. This provision applies to all debts incurred prior to the commencement of active duty and includes interest on credit card debt, mortgages, car loans and other debts. Provision rate reduction MUST be requested by the service member. Protection does not apply if the soldier was already in the active military service when the credit was granted.
The Act covers any member of the Uniformed Services serving on active duty. This includes Guard and component personnel called to active duty. If the soldier is protected, then all else obligated on the contract with the soldier are also protected. The soldier’s dependents are also protected for individual loans. For example: If a spouse of a soldier takes out a car loan in her name only and thereafter the soldier enters active duty, the spouse is considered a dependent and covered under the Act for rate reduction.
In order to obtain the interest rate reduction (lowered to 6%), the service member should notify the creditor in writing of the intent to invoke the 6% interest cap. Notification must include proof of mobilization/activation to active-duty along with date active duty begins.
The service member has from date of active duty to 180 days after the conclusion of active duty to provide notice of request for rate reduction. If the creditor doesn’t learn of the military service until several months after commencement, then the creditor would have to reduce the interest rate retroactively to 6%. It is the creditor’s obligation to reduce the rate if the soldier claims his entry to active duty materially affects his ability to repay. Service members are required to notify their creditors/lenders at the termination of active duty.
If you believe you may be eligible, please provide your written request for assistance along with your mobilization/activation to active-duty information to:
Paramount Bank
Attention: Loan Servicing Department
622 Emerson Rd. Ste. 325
St. Louis, MO 63141
