MLA (Military Lending Act) vs. SCRA (Servicemembers Civil Relief Act)

​

There are two Acts that protect military members when it comes to lending practices:

 

      •    The MLA protects service members, their spouses and/or covered dependents when

            opening debts while currently on active duty.

      •    By contrast, the SCRA protects service members (and, indirectly, their dependents) on

            existing debts when the service member becomes active duty.

MLA

The MLA limits the amount of interest to 36% APR, which includes all fees and back-end add-on financed products.  Since Connections Credit Union rates will probably not exceed this limit, we just have to verbally offer the disclosure on the loan note.

 

Our credit reports tell us whether the borrower qualifies under MLA by saying Match or No Match under the Alert section after the list of creditors: 

 

​

​

​

​

​

​

IF the credit bureau states they are MLA eligible we must acknowledge this by marking it on the loan worksheet and marking the box on the Loan and Security Agreement:

  

​

​

​

​

​

​

​

​

SCRA  
Servicemembers who meet the requirements under SCRA are eligible to receive an interest rate of 6% or less per year for debt incurred BEFORE entering active duty (or for reservists, debt incurred BEFORE receiving notice of active duty). Additionally, the credit union must reduce any required payment amount by the amount of interest forgiven, meaning we must do a Quick Amortization to figure what the payment would be with the same terms at the 6% rate instead of their written rate and adjust the payment down. This rate and payment reduction only applies to outstanding balances, so if the borrower uses a credit card or takes an advance on an open-end loan after being called to active-duty service, those items would be subject to the regular loan rate.
 

Eligible servicemembers may include:
 

      •    Active duty members of the Army, Navy, Air Force, Marine Corps, or Coast Guard
      •    Reservists serving on active duty in the Army, Navy, Air Force, Marine Corps, or Coast

            Guard
      •    Commissioned officers of the National Oceanic and Atmospheric Administration (NOAA)

            and Public Health Service on active service
      •    Other servicemembers who may qualify under certain state laws
 

Under the SCRA, it is the borrower responsibility to notify us IF we need to look at changing anything. To establish qualification for the SCRA benefits (6% loan rate cap), the borrower would need to provide us with documentation that could include: 
 

      •    Active duty orders
      •    DD Form 214 (Certificate of Release or Discharge from Active Duty)
      •    DD Form 215 (Corrected Certificate of Release or Discharge from Active Duty)
      •    VA Benefits Award Letter
      •    Military Disability Award Letter
      •    Letter from your executive or commanding officer on official letterhead that includes:
            o    Your name
            o    Active duty start date and end date
            o    Branch of service
            o    Last four digits of your Social Security number         
      •    Any other appropriate indicator of military service

 

Interest rate reductions on all eligible loans must be handled by Stephanie T.

 

The interest rate reduction on Home mortgages expires 12 months after the active military service is completed.

 

On all other eligible loans, the rate reduction expires 6 months after they complete their active military service.

​