50 USC 3937 – 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—
(A) during the period of military service and one year thereafter, in the case of an obligation or liability consisting of a mortgage, trust deed, or other security in the nature of a mortgage; or
(B) during the period of military service, in the case of any other obligation or liability.
(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) Proof of military service
(A) In general
Not later than 180 days after the date of a servicemember’s termination or release from military service, in order for an obligation or liability of the servicemember to be subject to the interest rate limitation in subsection (a), the servicemember shall provide to the creditor written notice and a copy of—
(i) the military orders calling the servicemember to military service and any orders further extending military service; or
(ii) any other appropriate indicator of military service, including a certified letter from a commanding officer.
(B) Independent verification by creditor
(i) In general
A creditor may use, in lieu of notice and documentation under subparagraph (A), information retrieved from the Defense Manpower Data Center through the creditor’s normal business reviews of such Center for purposes of obtaining information indicating that the servicemember is on active duty.
(ii) Safe harbor
A creditor that uses the information retrieved from the Defense Manpower Data Center under clause (i) with respect to a servicemember has not failed to treat the debt of the servicemember in accordance with subsection (a) if—
(I) such information indicates that, on the date the creditor retrieves such information, the servicemember is not on active duty; and
(II) the creditor has not, by the end of the 180-day period under subparagraph (A), received the written notice and documentation required under that subparagraph with respect to the servicemember.
(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.
(c) 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) Definitions
Terms Used In 50 USC 3937
- Deed: The legal instrument used to transfer title in real property from one person to another.
- Interest rate: The amount paid by a borrower to a lender in exchange for the use of the lender's money for a certain period of time. Interest is paid on loans or on debt instruments, such as notes or bonds, either at regular intervals or as part of a lump sum payment when the issue matures. Source: OCC
- Mortgage: The written agreement pledging property to a creditor as collateral for a loan.
- Obligation: An order placed, contract awarded, service received, or similar transaction during a given period that will require payments during the same or a future period.
- officer: includes any person authorized by law to perform the duties of the office. See 1 USC 1
In this section:
(1) Interest
The term “interest” includes service charges, renewal charges, fees, or any other charges (except bona fide insurance) with respect to an obligation or liability.
(2) Obligation or liability
The term “obligation or liability” includes an obligation or liability consisting of a mortgage, trust deed, or other security in the nature of a mortgage.
(e) Penalty
Whoever knowingly violates subsection (a) shall be fined as provided in title 18, imprisoned for not more than one year, or both.