The Servicemembers Civil Relief Act (SCRA)

The mission and work of military personnel is at times unpredictable and chaotic, and there are still many facets of life to manage — whether it be your family, your possessions, or your finances — while you go about the business of protecting your country. With a demanding and dangerous job, sometimes thousands of miles away from where you call home, it’s understandable that some aspects of your personal life could be overlooked, if even temporarily.

When it comes to financial matters, a late payment or an overlooked bill could eventually lead to complicated and expensive issues that can be challenging to resolve. So, who – or what – protects your financial interests while you protect your country?

The Servicemembers Civil Relief Act!

The SCRA is a law created to ease financial burdens and provide protection to those who serve our country. SCRA benefits can lower your interest rates, delay or suspend financial or civil obligations, and prevent you from being taken advantage of while deployed and away from home.

What Is the Servicemembers Civil Relief Act?

Enacted in 2003 and enforced by the U.S. Justice Department’s Civil Rights Division, the Servicemembers Civil Relief Act is a federal law that provides protections for military members as they enter and serve on active duty. It covers issues such as:

• Credit card interest rates
• Mortgage interest rates
• Mortgage foreclosures
• Civil judicial proceedings
• Automobile leases
• Rental agreements
• Security deposits
• Prepaid rent
• Evictions
• Installment contracts
• Getting out of phone contracts
• Life insurance
• Health insurance
• Income tax payments.

The law is designed to assist and defend military members in the event a legal or financial transaction adversely affects their rights during service.

The SCRA is a fairly new law, having been enacted in 2003, but it has since been amended several times while always continuing its mission of easing the financial burdens of military personnel. In fact, the protections offered by the SCRA are a revision and expansion of the Soldiers’ and Sailors’ Civil Relief Act of 1940 (SSCRA).

While you may never need SCRA benefits, its protections make it possible to fully concentrate on your mission.

Who Is Eligible for SCRA Protections?

All military personnel on active duty enjoy SCRA benefits and protections, including reservists and members of the National Guard while on active duty.

SCRA eligibility begins on a servicemember’s first day of active duty and typically expires within 30 to 90 days after a discharge.

Servicemembers eligible for SCRA benefits include:

• Active-duty members of the Army, Marine Corps, Navy, Air Force, Space Force and Coast Guard
• Members of the Reserve component when serving on active duty
• Members of the National Guard component while mobilized under federal orders for more than 30 consecutive days
• Active-duty commissioned officers of the Public Health Service or the National Oceanic and Atmospheric Administration.

SCRA Protections

Among the strongest and most beneficial protections offered by the SCRA is that it can delay, alter or even suspend financial or civil obligations for servicemembers on active duty and/or deployment – even for some loans and debts you incurred prior to your military service. For example, the SCRA offers opportunities for military personnel to cap interest rates on credit cards and mortgages. It also offers protections against default judgments in civil cases and can stave off a home foreclosure. These protections along with other military debt collection laws can help you deal with debt collectors as well. 

Reduced Interest Rate on Pre-Service Loans

Perhaps the most useful SCRA protections is that its reach covers certain financial obligations incurred prior to one’s military service. Specifically, the SCRA limits the amount of interest that can be charged by lenders to no more than 6% per year – including most fees – on financial obligations.

The types of financial obligations eligible for the SCRA interest rate cap at 6% annually are:

• Credit cards
• Automobile loans
• ATV loans
• Boat and other vehicle loans 
• Mortgages 
• Home equity loans
• Student loans

To qualify for an interest rate reduction, you must provide a creditor with written notice and a copy of your military orders or other appropriate indicator of military service, such as a letter from a commanding officer. In response, a creditor must forgive (and not defer) interest greater than 6% per year on qualifying debt.

But the reduced interest rates apply only while on active duty, and a servicemember must provide notice to creditors within 180 days of the end of active-duty service. Mortgage rates are capped at 6% while on active duty, plus for one additional year after the period of military service.

This benefit offers an easy way to rid yourself of high-interest credit card or mortgage rates, and potentially save hundreds or even thousands of dollars per year.

Default Judgments in Civil Cases

Certain debt problems could lead to legal proceedings that include court appearances, which do not always align with the demands of deployment or military service. The SCRA offers protections for active military personnel against default judgments and guidelines for creditors once these matters move into a court room.

The SCRA states that in any civil court proceeding in which a defendant-servicemember does not make an appearance, a plaintiff-creditor must file an affidavit with the court stating one of three things:

1. that the defendant is in military service;
2. that the defendant is not in military service;
3. that the creditor is unable to determine the defendant is in military service.

According to the U.S. Justice Department, these statements are most commonly needed in judicial foreclosure proceedings.

Yet, other proceedings are also covered. The SCRA guidelines say “for civil court proceedings where a defendant servicemember has not made an appearance and it seems that he or she is in military service, a court may not enter a default judgment against that defendant until after it appoints an attorney to represent the interests of that defendant servicemember.” What’s more, the court must stay a civil court proceeding for at least 90 days if the attorney is unable to contact the defendant servicemember.

Home Foreclosure

In the category of home mortgages and non-judicial foreclosures, the SCRA’s protections extend for one year beyond the period of active-duty service. The law states that a creditor must obtain a court order prior to foreclosing on a mortgage. (This is a strict liability section of the SCRA, and a person who knowingly violates it may be fined and/or imprisoned for up to one year.)

While the protection period – known as the “tail coverage period” – currently offers protections for one year after active-duty service, that coverage period has been extended and condensed several times since the SCRA was enacted:

• December 19, 2003 to July 29, 2008 – 90 days of coverage past the end of active-duty service
• July 30, 2008 to February 1, 2013 – Nine months
• February 2, 2013 to December 31, 2015 – One year
• January 1, 2016 to March 30, 2016 – 90 days. (However, on March 31, 2016, the Foreclosure Relief and Extension for Servicemembers Act of 2015 was signed into law. This extended the tail coverage period for non-judicial foreclosures back to one year, and made this change retroactive to January 1, 2016.)
• March 31, 2016 to present – One year

The SCRA also dictates that the courts must stay a non-judicial foreclosure proceeding or adjust payments if a servicemember’s ability to meet obligations was affected by military service.

This benefit could mean the difference between staying in a home and avoiding a foreclosure, and its coverage period of up to one year after the end of your active-duty service means the SCRA provides time to resolve these issues so you land on your feet.

Repossession of Personal Property

SCRA benefits also reach into the areas of installment contracts and offers guidelines on repossession of vehicles, under certain conditions. Specifically, a lender cannot repossess a vehicle during a borrower’s period of military service without a court order. But this protection is offered only if the servicemember either placed a deposit on the vehicle or made at least one installment payment prior to military service.

Terminating Residential and Automobile Leases

A common, and sometimes frequent, concern among military personnel is the need to terminate residential and automobile leases, without creating unwanted debt or complications. The SCRA provides servicemembers being relocated via “permanent change of station” (PCS) orders with the ability to terminate car leases differently than those outside of the military.

To qualify for these protections, the PCS orders must be for a period of at least 90 days. Other SCRA guidelines for terminating a lease include:

• “With respect to residential apartment leases, the SCRA requires that the premises be occupied (or are intended to be occupied) by a servicemember or a servicemember’s dependent(s).”
• “the servicemember must submit a written notice and a copy of his or her military orders – or a letter from a commanding officer – by certain methods to the landlord or landlord’s agent.”
• “If a service member pays rent on a monthly basis, once he or she gives proper notice and a copy of his or her military orders, then the lease will terminate 30 days after the next rent payment is due.”

SCRA eligibility also offers spouses some protections should a servicemember die while on active duty, allowing the spouse of a lessee to “terminate the lease within one year of the death.”

Enforcement of Storage Liens

The SCRA also dictates how a storage company or tow company, for example, must proceed with action on storage liens for property belonging to a servicemember. The law states that “a person holding a lien on the property of a service member, such as a storage facility or a tow company, may not enforce the lien (dispose of the property) without a court order during the servicemember’s period of military service and 90 days thereafter.” 

Conclusion

No matter the financial issue or problem, there is a good chance the Servicemembers Civil Relief Act offers a layer protection or assistance that will allow you to focus on your mission without worrying about your property or potential legal problems at home.

However, if you feel like your debt is out of control, it may be time to contact a nonprofit credit counseling agency. Their counselors are trained and required to offer advice that’s in your best interest, meaning you will see all the best options for getting your budget, finances and debt under control.