Utah Legislature Considers Military Lending Bill

March 16, 2023 10:12 pm
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On February 13, a bill was introduced in the Utah House of Representatives, entitled HB 455, that would add protections relating to credit obligations and certain installment contracts for service members assigned to a “Utah-based military organization” (UBMO), defined as “a military organization headquartered in [Utah].”

HB 455 includes two primary protections that would apply to obligations incurred after a covered service member has entered military service, analogous to protections afforded by the federal Military Lending Act, 10 U.S.C. § 987 (MLA). And, as with the MLA, these proposed protections would generally apply to a service member’s covered dependents.

  • First, the bill would add a 36% interest rate cap on debts incurred by a covered service member after entry into service with a UBMO. While similar to the MLA’s 36% “all in” Military Annual Percentage Rate (MAPR) cap, HB 455 more broadly defines interest to cover “service charges, renewal charges, fees, or any other charges in respect to any obligation or liability” (emphasis added). The bill would give the Utah Department of Veterans and Military Affairs rulemaking authority, offering a potential avenue to clarify which charges would be included or excluded from the interest rate calculation.
  • Second, the bill addresses installment contracts for the sale of real or personal property entered into after a service member has entered military service. With respect to such contracts, HB 455 would prohibit creditors from terminating the contract or repossessing the property “for nonpayment or any breach occurring during military service without an order from a court of competent jurisdiction.” This state protection would complement a similar provision in the federal Servicemembers Civil Relief Act (SCRA) which applies to obligations on real or personal property “originated before the period of the servicemember’s military service.” 50 U.S.C. § 3953(a)(1).

Finally, like the SCRA, HB 455 would provide a mechanism by which a servicemember could petition a court for relief with respect to obligations incurred prior to the member’s period of military service. A servicemember could apply for this form of relief while assigned to a UBMO or within 60 days after discharge or termination.

These protections are in addition to those already provided for under Utah’s “mini-SCRA” (the Utah Service Members’ Civil Relief Act, Utah Code Ann. § 39-7-101 et seq.), and each would be subject to the right of creditors to seek a court ruling that the service member or dependent’s ability to comply with underlying obligation is “not materially affected by reason of the service member’s service.”

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