SCRA Implementation in Banking: State Compliance and More
What is SCRA?
SCRA which stands for Servicemembers Civil Relief Act, is a federal law in the US that provides a set of benefits for the financial protection of military members and their dependents. The law eases some of the financial obligations of the servicemembers, and in some cases, suspends the enforcement of civil liabilities, enabling them to devote their complete attention to military service.
Why is SCRA relevant to localization in banking?
Banks in the US must support and offer benefits to the servicemembers and their dependents as defined by the SCRA federal law. Since the benefits offered under SCRA are specific to the US, the availability of a feature that helps banks implement this law is localization relevant.
How is SCRA realized in Banking Localization?
The need for implementation of SCRA benefits called for the enablement of a feature called Exemption Order in the product portfolio. This feature allows the registration of servicemembers or their dependents, and records the details of the servicemembers with reference to the active duty period. Based on the service deployment period details of the servicemember, the servicemembers and their dependents are exempted of any fees and charges on their loan accounts with the bank.
The Exemption Order feature enables banks to do the following:
- Register customers as servicemembers and the customers’ dependents as servicemembers dependents to confer them with benefits under SCRA such as reduced interest rates for loans and exemption of fees and charges.
- Trigger the adjustment of interest payments made by servicemembers or their dependents to the 6% cap as regulated by SCRA, the benefit being valid only during active service duty of the member.
- Prevention of acceleration of principal payable during the active deployment period of the servicemember, so as the member or his dependents pay a reduced installment, such that the amount of the installment is reduced by the interest amount forgiven in excess of 6%.
- Extend the benefits under SCRA for the servicemembers and their dependents when the service period of the servicemember is prolonged.
- Automatically cancel the SCRA benefits conferred on the loans and readjust the interest rates when the servicemember completes the duty period.
Are state variations in SCRA handled through this feature?
The Exemption Order feature enables banks to process state specific variations of the SCRA regulation. Based on the state to which the servicemember belongs, the minimum deployment period, the categories of service, and the grace period offered to customers beyond the end of military service, can vary. All customers are offered special payment plans for the executed period depending on the conditions selected for an individual state.
Are there enterprise services that can be used for handling Exemption Order data?
A general localization enterprise service, Loan Exemption request, contains operations required to create, read, cancel, and retrieve data in a request from the borrower to the bank. As per state specific requirements, banks in the US can utilize this service to create, display, cancel, and retrieve interest exemption data in the system.