BILL ANALYSIS �
AB 2476
Page 1
Date of Hearing: May 8, 2012
ASSEMBLY COMMITTEE ON JUDICIARY
Mike Feuer, Chair
AB 2476 (Veterans Affairs) - As Introduced: February 24, 2012
PROPOSED CONSENT
SUBJECT : SERVICEMEMBER OBLIGATIONS: INTEREST RATES
KEY ISSUE : IN ORDER TO BETTER PROTECT DEPLOYED SERVICEMEMBERS
FROM FINANCIAL HARM, SHOULD CALIFORNIA TRACK FEDERAL LAW
LIMITING THE MORTGAGE INTEREST RATES THAT MAY BE CHARGED TO A
RETURNING VETERAN?
FISCAL EFFECT : As currently in print this bill is keyed
non-fiscal.
SYNOPSIS
The federal Servicemembers Civil Relief Act (SCRA) provides
civil protections for servicemembers, including a limitation on
interest rates they may be charged while they are in the
military. The federal Housing and Economic Recovery Act in 2008
made a number of changes to the SCRA. One of the changes was
that servicemembers are protected from interest rates in excess
of 6 percent on mortgages during the period of service and also
for one year after their service is completed. California law
had tracked this provision of the SCRA prior to its latest
amendment. This bill amends California law to once again track
federal law by giving servicemembers an extra year, upon the end
of their service, at which interest rates on their homes will
remain low. This bill is supported by veteran groups and the
financial services industry. There is no known opposition to
the bill.
SUMMARY : Extends the period during which mortgage interest
rates are capped for servicemembers. Specifically, this bill
prohibits, except as provided, an obligation or liability
incurred by a servicemember before that person's entry into
service from bearing interest in excess of six percent per year:
1)During the period of military service and one year after, in
the case of an obligation or liability consisting of a
mortgage, trust deed, or other security in the nature of a
mortgage; or
AB 2476
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2)During the period of military service, in the case of any
other obligation.
EXISTING LAW :
1)Provides that no obligation or liability bearing interest at a
rate in excess of six percent per year incurred by a
servicemember before that person's entry into service shall,
during any part of the period of military service, bear
interest at a rate in excess of six percent per year unless,
in the opinion of the court, upon application by the obligee,
the ability of the servicemember to pay interest at a rate in
excess of six percent per year is not materially affected by
reason of that service, in which case the court may make that
order as in its opinion may be just. Provides damages and
attorney's fees for violation of these provisions. (Military
and Veterans Code Section 405.)
2)Provides, under the SCRA, that an obligation or liability
bearing interest at a rate in excess of six 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 six 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. Allows a court to grant a creditor relief from
these provisions. (50 U.S.C. Appx Section 527.)
COMMENTS : The SCRA provides civil protections for
servicemembers who are deployed. These protections include
limiting the interest rate that can be charged to servicemembers
during their period of service. The passage of the federal
Housing and Economic Recovery Act in 2008 made a number of
changes to the SCRA. One of those changes was that
servicemembers are protected from interest rates in excess of
six percent on mortgages not only during the period of service,
but also for one year after their service is completed.
California law had tracked this provision of the SCRA prior to
its latest amendment. This bill amends California law to once
again track federal law by giving servicemembers an extra year,
upon their return from deployment, at which interest rates on
their homes will remain low.
AB 2476
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Both existing law and this bill still permit the obligee owed
the debt to petition for a rate greater than six percent. To do
so, the obligee must show that the servicemember's ability to
pay a higher interest rate is not materially affected by his or
her service. In that case, the court is allowed to make an
order that, in the opinion of the court, is just.
Veterans groups support of the measure because it will "help
service members with financial matters during their transition
to civilian life."
REGISTERED SUPPORT / OPPOSITION :
Support
AMVETS--Department of California
American Legion--Department of California
California Association of County Veterans Service Officers
California Bankers Association
California Mortgage Bankers Association
California State Commanders Veterans Council
Vietnam Veterans of America--California State Council
Opposition
None on file
Analysis Prepared by : Leora Gershenzon / JUD. / (916)
319-2334