Under the SCRA, what happens to the extra interest not allowed over 6%?

Under the Servicemembers Civil Relief Act (SCRA), the law provides specific protections to servicemembers regarding the interest rates applicable to their debts. When a servicemember is called to active duty, the SCRA limits the interest that can be charged on pre-existing debt to no more than 6% per year.

If a credit union or lender has charged an interest rate above this 6% cap, that excess interest is not only prohibited but must also be addressed appropriately according to the provisions of the SCRA. The correct course of action is that the credit union must forgive the amount of interest that exceeds the 6% limit. This means that the lender cannot require the servicemember to pay the excess interest, nor can they convert this excess into fees or apply it to future payments.

This provision is designed to ease the financial burden on servicemembers during their time of service, ensuring that they are not penalized with excessive interest rates while they are on active duty. By forgiving the excess interest, the SCRA aims to protect the financial well-being of those who serve in the military.