|
Question: We have a customer who is in basic training for a branch of the military. He believes that we cannot charge him insufficient funds fees while he is in basic training. Is this so? I have read several things on interest rates and different things like that, but I do not see anything on service charges.
Answer: First of all, I know of no special rules for soldiers who are in basic training. If he is sure there is such a rule, you might ask him to get a citation to the law for you from the JAG or the person who told him this.
He may be talking about this provision from the Servicemembers Civil Relief Act, but it is not specifically for basic training and he'd have to go to court to request this relief:
"If a servicemember fails to perform an obligation arising under a contract and a penalty is incurred arising from that nonperformance, a court may reduce or waive the fine or penalty if 1) the servicemember was in military service at the time the fine or penalty was incurred; and 2) the ability of the servicemember to perform the obligation was materially affected by such military service." 203(b)
There is another possibility where SCRA could give a servicemember relief with an NSF. Let's consider these four possible scenarios with the servicemember you are talking about:
1) Prior to him entering the military, your bank charged an NSF fee, but returned the items or items NSF.
2) After he entered the military, your bank charged an NSF fee, but returned the items or items NSF.
3) Your bank paid the item or items and charged an NSF fee before he entered the military.
4) Your bank paid the item or items and charged an NSF fee after he entered the military.
Numbers 1 and 2: If the item or items were returned NSF and you charged an NSF fee, then you are OK because the NSF fee is not related to a loan. SCRA only applies to lending. The answer is the same whether the item was returned NSF before or after he entered the military.
Number 3: If your bank paid the item or items, then that is a loan. The NSF fee is associated with the loan; however, it is unlikely that it is interest subject the 6 % cap in SCRA. An NSF fee is not interest, so long as:
|
|
|
it was assessed as a processing fee for the additional work required in connection with handling the bad check; |
|
|
|
the decision to charge the fee was a separate decision from the decision to honor or dishonor a bad check; |
|
|
|
it was charged to all customers, in the same amount, regardless of whether First Bank paid or rejected a check; and |
|
|
|
the amount had no relationship to the amount of the funds advanced. |
If #3 is your scenario and your NSF fee meets all the bullet points, the fee is not interest and you do not need to refund anything. If your NSF fee does not meet all the bullet points, then it is possible that the fee would be considered interest subject to the 6% cap in SCRA.
Number 4: If your bank paid the item or items, then that is a loan and the NSF fee is associated with the loan. Because, in scenario 4, it happened after he entered the military, it is not an "obligation" and SCRA does not apply. There would be no need to refund the fee.
|  |
