Service Member's Civil Relief Act of 2003 - Notice to Creditor Before 6% Interest Cap

[Guest rocnrols2]

The recently enacted Service Member's Civil Relief Act of 2003 updates the old Soldiers and Sailors Cvil Relief Act. The provision stating that loan interest cannot exceed 6% is contingent on the service member providing notice to the creditor. In the context of a 401(k) plan, must the notice be given to the plan or is it sufficient if it is provided only to the employer?

[Belgarath]

Under a strictly literal reading, I'd read this as requiring notice to the Plan Administrator/Trustee, as it requires notice to the Creditor.

‘‘SEC. 207. MAXIMUM RATE OF INTEREST ON DEBTS INCURRED BEFORE

MILITARY SERVICE.

‘‘(a) INTEREST RATE LIMITATION.—

‘‘(1) LIMITATION TO 6 PERCENT.—An obligation or liability

bearing interest at a rate in excess of 6 percent per year

that is incurred by a servicemember, or the servicemember

and the servicemember’s spouse jointly, before the

servicemember enters military service shall not bear interest

at a rate in excess of 6 percent per year during the period

of military service.

‘‘(2) FORGIVENESS OF INTEREST IN EXCESS OF 6 PERCENT.—

Interest at a rate in excess of 6 percent per year that would

otherwise be incurred but for the prohibition in paragraph

(1) is forgiven.

‘‘(3) PREVENTION OF ACCELERATION OF PRINCIPAL.—The

amount of any periodic payment due from a servicemember

under the terms of the instrument that created an obligation

or liability covered by this section shall be reduced by the

amount of the interest forgiven under paragraph (2) that is

allocable to the period for which such payment is made.

‘‘(b) IMPLEMENTATION OF LIMITATION.—

‘‘(1) WRITTEN NOTICE TO CREDITOR.—In order for an obligation

or liability of a servicemember to be subject to the interest

H. R. 100—11

rate limitation in subsection (a), the servicemember shall provide

to the creditor written notice and a copy of the military

orders calling the servicemember to military service and any

orders further extending military service, not later than 180

days after the date of the servicemember’s termination or

release from military service.

‘‘(2) LIMITATION EFFECTIVE AS OF DATE OF ORDER TO ACTIVE

DUTY.—Upon receipt of written notice and a copy of orders

calling a servicemember to military service, the creditor shall

treat the debt in accordance with subsection (a), effective as

of the date on which the servicemember is called to military

service.

‘‘© CREDITOR PROTECTION.—A court may grant a creditor relief

from the limitations of this section if, in the opinion of the court,

the ability of the servicemember to pay interest upon the obligation

or liability at a rate in excess of 6 percent per year is not materially

affected by reason of the servicemember’s military service.

‘‘(d) INTEREST.—As used in this section, the term ‘interest’

includes service charges, renewal charges, fees, or any other charges

(except bona fide insurance) with respect to an obligation or liability.