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The Servicemember’s Civil Relief Act

The men and women of the Armed Forces have historically lived a difficult and often dangerous life—expected to pick up and travel anywhere in the world, often without being able to adequately provide for all of their financial obligations.

The Soldier’s and Sailor’s Civil Relief Act of 1940 was passed prior to World War II so that military service members would have financial and legal protection in case they were called to active duty or deployed to new duty stations. On Dec. 19, 2003, President Bush replaced this law so it would include additional protections, and changed the name to the “Servicemembers’ Civil Relief Act,” or SCRA.

As a lender to military service members for nearly 30 years, we at Pioneer Services feel that it is imperative that our customers know what the act does for them. We hope that the following will help answer some of the questions you might have. 

What does the SCRA do?

The SCRA, as updated in 2003, provides some of the following protections:

  • The ability to terminate automobile leases without having to pay early termination penalties.
  • Prevents repossession of a service member’s personal property without a specific court order that takes into account their military duty status. The term “personal property” includes automobiles.
  • Provides an automatic, 90-day stay in civil court proceedings. If an additional stay is subsequently requested by the service member, but denied, the court must then appoint a lawyer to protect the service member’s rights while he or she remains on active duty.
  • Protects service members and their families from eviction if they cannot pay their rent due to a deployment or change in duty station. In order to receive this protection, the service member’s rent cannot be more than $2,400 per month.
  • Allows a service member who receives a permanent change of station, or who is deployed to a new location for more than 90 days, the right to terminate a housing lease without penalty.
  • Places a limit of 6 percent on interest charges for all credit obligations incurred prior to being called to active duty. This includes credit card debt and loans.

How does it work?

If you get called to active duty and want to receive the interest rate reduction for your debts, you need to notify your creditors in writing as soon as possible. The law states specifically in Section 207 that:

In order for an obligation or liability of a servicemember to be subject to the interest rate limitation … the servicemember shall provide to the creditor written notice and a copy of the military orders calling the servicemember to military service and any orders further extending military service, not later than 180 days after the date of the servicemember's termination or release from military service.

Once the creditor receives this information, the rate will be reduced starting from the date you were actually called up, not the date the creditor received the request. It also prevents lenders from charging you any accelerated principal payments.

What are the catches?

There are two key parts of the law that serve as caveats to these rules, and these are where most of the confusion arises. Both are in Section 207, and the first details to which debts the rules apply:

(1) LIMITATION TO 6 PERCENT- An obligation or liability bearing interest at a rate in excess of 6 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 6 percent per year during the period of military service.

This means that anything incurred while on active duty status does not have to be altered under the SCRA. This is probably the most commonly misunderstood part of the law, and one that frustrates a lot of military families.

The second confusing part concerns the section that gives lenders some protections:

(c) CREDITOR PROTECTION- A court may grant a creditor relief from the limitations of this section if, in the opinion of the court, the ability of the servicemember to pay interest upon the obligation or liability at a rate in excess of 6 percent per year is not materially affected by reason of the servicemember's military service.

For example, if you serve in the National Guard and are called to active duty, yet your employer continues to pay you your full salary during the entirety of your deployment, odds are your service has not materially affected your ability to pay your debts. (In fact, you might wind up with more money thanks to specialty pay.) This means a lender could challenge your request for an interest rate reduction.

Where can I get more information?

The following websites offer information about the SCRA and its predecessor, the Soldiers and Sailor’s Relief Act of 1940. You can also contact your commander, as he or she should be able to provide you with more information.

Here is a brief history of the SSCRA of 1940:

A detailed look at the SCRA:

A more “simplified” view of the act: