For those serving in the United States military, navigating civilian life while fulfilling their duties can present unique challenges. Recognizing these challenges, the Service Members Civil Relief Act (SCRA) is a federal law designed to ease the financial and legal burdens on servicemembers and their families during periods of active duty. This article delves into the critical protections offered by the SCRA, ensuring that military personnel can focus on their missions without undue stress about civil obligations back home.
The SCRA extends its comprehensive protections to the following individuals:
- Active duty members of the U.S. Army, Marine Corps, Navy, Air Force, and Coast Guard.
- Reservists on active duty.
- National Guard members mobilized under federal orders for more than 30 consecutive days.
- Commissioned officers on active duty in the Public Health Service or the National Oceanic and Atmospheric Administration.
Importantly, SCRA rights can be exercised by individuals holding a valid power of attorney for a servicemember, and certain protections are also extended to dependents.
The U.S. Department of Justice highlights five key areas where servicemembers frequently seek SCRA protection. Understanding these protections is crucial for every member of the military community.
Protection #1: Capped Interest Rates on Pre-Service Debt
One of the most significant benefits of the SCRA is the limitation on interest rates for debts incurred before active duty. If a servicemember obtained loans—such as for a vehicle, home, or education—or accumulated credit card debt prior to beginning their military service, the SCRA mandates a reduction of the interest rate to a maximum of 6 percent per year. This benefit also applies to debts held jointly with a spouse.
To activate this protection, servicemembers must provide written notification to their lender, accompanied by a copy of their active duty orders or an official letter from their commanding officer confirming their active duty start date.
This interest rate cap applies for the duration of active duty for most loans and extends for an additional year post-active duty for mortgages. Lenders are legally obligated to reduce the interest rate to 6 percent from the moment a valid request is made and cannot recoup the forgone interest after the servicemember concludes their active duty. Servicemembers can request this rate reduction at any point during their active duty and up to 180 days following their release.
It’s crucial to understand that invoking SCRA rights protects servicemembers from adverse actions by lenders. Lenders are prohibited from revoking loans or credit accounts, altering credit terms, or denying credit solely because a servicemember has exercised their SCRA rights. Furthermore, lenders cannot report negative credit information to credit agencies for the same reason. While the SCRA provides vital interest rate relief, it’s essential to remember that servicemembers are still responsible for repaying their debts.
Protection #2: Safeguarding Against Default Judgments
Active duty servicemembers facing civil lawsuits are afforded crucial protections against default judgments under the SCRA. A default judgment occurs when a court rules in favor of the plaintiff because the defendant fails to appear or defend themselves in court.
The SCRA provides several safeguards to prevent default judgments against servicemembers:
- Affidavit Requirement: Before a default judgment can be issued, the suing party must file an affidavit with the court, declaring whether the defendant is in active duty and presenting evidence to support this claim. If active duty status cannot be determined, the affidavit must state this fact.
- Attorney Appointment: If a servicemember is on active duty and has not appeared in court, the court is obligated to appoint legal counsel to represent them before any default judgment can be entered.
- Stay of Proceedings: The court is required to grant a delay of at least 90 days in proceedings if certain conditions are met, allowing servicemembers time to respond to legal actions without prejudice due to their military duties.
These provisions are designed to ensure that servicemembers are not unfairly penalized in civil court due to their absence or inability to fully engage in legal proceedings while serving their country.
Protection #3: Preventing Foreclosure Without Court Order
For servicemembers who secured a mortgage prior to entering active duty, the SCRA provides significant protection against home foreclosure. Unless a servicemember has explicitly waived their SCRA rights, foreclosure on their property cannot proceed without a court order. This protection is in effect during active duty and for one year following the conclusion of active duty. This protection is applicable regardless of state laws regarding foreclosure procedures and even if the lender is unaware of the borrower’s servicemember status.
Under the SCRA, a court can, on its own initiative, and must, upon request from the servicemember, halt or postpone foreclosure proceedings. The court can also adjust the terms of the loan if the servicemember’s ability to meet their mortgage obligations is materially impacted by their active duty service.
As previously mentioned, the SCRA’s protections against default judgments also extend to foreclosure cases, ensuring that servicemembers have legal representation and due process in foreclosure proceedings.
Protection #4: Protection Against Repossession of Personal Property
The SCRA also shields servicemembers from the repossession of personal property, including vehicles, without a court order under specific circumstances. Even if a servicemember breaches a contract—for instance, by missing payments—a creditor must first obtain a court order before repossessing their vehicle or other personal property.
This protection applies specifically if:
- The servicemember purchased or leased the property before entering active duty.
- The servicemember made a deposit or installment payment on the property before entering active duty.
These federal safeguards provided by the SCRA are in addition to any protections offered by state laws, providing a robust safety net for servicemembers.
It is important to note that while the SCRA prevents repossession without a court order, it does not excuse servicemembers from their financial obligations. Failure to make payments can still result in late fees, negative credit reporting, and potential lawsuits from creditors to recover the debt.
Protection #5: Easing Lease Termination for Housing and Vehicles
The SCRA grants servicemembers the right to terminate both residential housing and vehicle leases without penalty under specific conditions related to military orders.
For residential leases, if a servicemember signed a lease before active duty, or if they receive Permanent Change of Station (PCS) orders or deployment orders for at least 90 days while on active duty, they are entitled to terminate their housing lease without financial repercussions.
To terminate a housing lease, the servicemember (or someone with power of attorney) must provide the landlord with written notice of termination and a copy of their military orders or a commanding officer’s letter. This notice can be delivered in person, via private carrier, through registered mail with return receipt, or electronically (e.g., email).
Termination of a monthly residential lease becomes effective 30 days after the date when the next rent payment is due following the delivery of the termination notice.
For vehicle leases, the SCRA allows termination without early termination charges or penalties under certain conditions. This applies if the lease was entered into:
- Before entering active duty, and the servicemember is then called to active duty for 180 days or more.
- During active duty, and the servicemember subsequently receives orders for:
- A PCS from the continental United States (CONUS) to outside CONUS, or from outside CONUS to any new location.
- Deployment with a military unit or in support of a military operation for 180 days or longer.
Similar to housing leases, terminating a vehicle lease requires providing the leasing agent with written notice of termination and a copy of military orders or a commanding officer’s letter via the same delivery methods.
It’s advisable for servicemembers to carefully review lease terms and consider their potential for PCS orders before signing any lease agreements. The SCRA does not cover PCS orders within CONUS, so understanding lease clauses regarding out-of-state vehicle use is crucial.
Conclusion
The Service Members Civil Relief Act is a vital safeguard, offering a wide array of legal and financial protections that allow servicemembers to concentrate on their critical missions with less concern about civilian legal and financial matters. By understanding and utilizing these protections, military personnel can maintain financial stability and legal security during their service.
For detailed information regarding your rights under the SCRA, it is recommended to contact the nearest military legal assistance office. Resources can be found at: legalassistance.law.af.mil.
For broader financial guidance and support throughout the military lifecycle, please visit: consumerfinance.gov/military-financial-lifecycle.
