A proposal to limit interest rates on all troops' loans to 3 percent would offer unprecedented sweeping new benefits to service members if it became law.



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Sen. Patty Murray, D-Wash., introduced the SCRA Enhancement and Improvement Act of 2016 on Thursday, proposing stronger and more far-reaching financial legal protections under an amended Servicemembers' Civil Relief Act. ​



Under the SCRA, service members are supposed to receive a 6 percent interest rate cap on ​debts incurred before they enter active duty. That applies to loans service members took out either before they joined the military on active duty, or before they are called to active duty as a Guard or ​Reserve member.



The legislation proposed Thursday would require all loans to service members be capped at a 3 percent interest rate, regardless of when the debt is incurred. For service members who are eligible for hostile fire pay or imminent danger pay, the interest rate would be zero.



If this legislation becomes law, it could mean that service members could not be charged more than 3 percent for any loan, including mortgages and credit cards.



The proposed legislation would have to move through a number of steps before becoming law and some observers say it is a long shot,



"I’m sure this is well-intended, but the rate seems awfully low," ​said one representative of an organization that advocates for the military community. While the organization is supportive of benefits for service members, requiring a 3 percent ceiling on interest rates could lead to military members being unable to obtain loans or credit cards, he said.



But that wouldn't be a problem under Murray's bill, contends Murray spokeswoman Kerry Arndt. She said the bill would prohibit lenders from denying credit because of eligibility for SCRA protections, so service members wouldn't see any reduction in access to credit and they would be protected from predatory and unfair practices.



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Murray, the top Democrat on the Senate Health, Education, Labor and Pensions Committee and a senior member of the Senate Veterans’ Affairs Committee, said that businesses haven't always honored ​Servicemembers' Civil Relief Act protections, and the law needs to be strengthened ​. The most recent example is student loan servicers who overcharged military borrowers ​after they were called to active duty. Some servicers did not reduce the rates to 6 percent.



"In recent years, we’ve seen our service members subjected to predatory practices and unfair treatment on several fronts, from overcharges on their student loans, to foreclosures on their homes when they’re deployed. That is simply unacceptable," Murray said in a statement announcing the proposed changes.



The legislation would require student loan servicers of federally guaranteed student loans to automatically apply the interest rate cap, and provide timely responses to inquiries. The servicers would also be required to have a designated service representative or point of contact for service members and ensure that these staff are properly trained.



If a service member dies in the line of duty, federal and private student loan debt would be forgiven.



The proposed legislation includes some other expanded protections — including prohibiting prepayment penalties if a mortgage is paid off early for reasons related to a permanent change-of-station move.



It would also allow service members to cancel contracts on cable TV and Internet services in the event of permanent change-of-station moves. Currently, similar protections are offered for residential and auto leases and cellphone contracts.



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Karen Jowers covers military families, quality of life and consumer issues for Military Times. She can be reached at kjowers@militarytimes.com.



