GNYADA 2019 Membership Directory & Services Guide

Servicemembers Civil Relief Act (SCRA) Formerly called the Soldiers and Sailors Civil Relief Act, this law imposes a 6-percent rate cap on pre-existing secured credit, including vehicle credit sale or a loan, during the period of military service. These provisions apply to both the person in military service and their dependents with respect to obligations entered into by such persons before the service member was called to active duty status. The SCRA also allows service members to terminate pre-service automobile leases if they are called for military service of 180 days or longer. Service members who sign automobile leases while on active duty may be able to terminate an automobile lease and receive a refund of any lease amounts paid in advance if they are given orders for a permanent change of station outside the continental United States or to deploy with a military unit for a period of 180 days or longer. A large auto lessor agreed to pay millions to settle a SCRA claim with the Department of Justice (DOJ) related to DOJ charges that the lessor failed to properly refund lease amounts paid in advance consisting of a pro rata portion of the lessee’s capitalized cost reduction (minus manufacturer rebates or similar incentives, the payoff of negative equity or prior lease balances, payments for vehicle maintenance and other ancillary products, the amount of any acquisition fee, and any amounts paid for tax, title, and license). In addition, the SCRA requires a creditor to file an affidavit with the court regarding whether or not a customer is in military service before obtaining a default judgement against a customer. It also permits a court to stay (delay) the repossession of a vehicle in certain circumstances. It requires a court to review and approve any repossession or termination of a lease if the service member entered into the credit sale, loan, or lease and made a payment before entering military service. The court may delay the repossession or require the creditor to refund prior payments before repossessing. It can also appoint an attorney to represent the service member, require the creditor to post a bond with the court, and issue any other orders it deems necessary to protect the service member. The law also imposes special requirements on a creditor accepting a voluntary surrender of a vehicle. A large subprime auto finance creditor agreed to pay millions to settle a SCRA claim with the DOJ related to charges that the creditor failed to obtain court orders before repossessing motor vehicles owned by protected service members, preventing them from obtaining a court’s review on whether their repossessions should be delayed or adjusted in light of their military service. The Military Lending Act The Military Lending Act (MLA) is a federal law that imposes limitations on the cost and terms of certain extensions of credit to service members and their dependents (“covered borrowers”). The MLA applies to “consumer credit” extended by a creditor to a “covered borrower.” For purposes of the MLA, “consumer credit”means “credit offered or extended to a covered borrower primarily for personal, family, or household purposes, and that is: (i) subject to a finance charge; or (ii) payable by a written agreement in more than four installments.”There are only four narrow exceptions to this definition of consumer credit, along with a temporary exemption for credit cards: (i) residential mortgages; (ii) any credit transaction that is expressly intended to finance the purchase of a motor vehicle when the credit is secured by the vehicle being purchased; (iii) any credit transaction that is expressly intended to finance the purchase of personal property when the credit is secured by the property being purchased; and (iv) any credit transaction that is an exempt transaction for the purposes of Regulation Z. These narrow exceptions were not clearly defined in the MLA and are subject to interpretation.

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