The Servicemembers Civil Relief Act
The Servicemembers Civil Relief Act (SCRA) is a law created to provide extra protections for servicemembers in the event that legal or financial issues arise from complications due to their service to the United States of America. It provides a number of benefits that are discussed below.
The SCRA applies to the following servicemembers:
- Active duty members of the Army, Marine Corps, Navy, Air Force, and Coast Guard;
- Members of the Reserve component when serving on active duty;
- Members of the National Guard component mobilized under federal orders for more than 30 consecutive days; or
- Active duty commissioned officers of the Public Health Service or the National Oceanic and Atmospheric Administration.
A servicemember’s rights under the SCRA can be invoked by the member or by anyone holding a valid power of attorney for that servicemember.
Interest Rate Reduced to Six Percent APR
If you incurred a debt (student loan, credit card, mortgage, car loan, etc.) before joining the military or before receiving active duty orders, you are entitled to have your interest rate reduced to 6% APR. You must notify your lender in writing and provide a copy of your orders. A lender cannot refuse to issue a loan, cause negative credit reporting, or otherwise retaliate against you for invoking your rights under the SCRA.
Protection From Default Judgments
If you are sued, the party suing you must verify if you are on active duty by submitting your information to the Department of Defense. If you are serving on active duty, the court cannot enter a default judgment against you without providing you with an opportunity to obtain a lawyer and defend yourself.
Protection From Foreclosure and Repossession
If you took out a mortgage before serving on active duty, you cannot be foreclosed on without a court order unless you consent to the foreclosure. This is very valuable in places like Mississippi where foreclosures are commonly done without court order and in as little as 28 days. If service on active duty has affected your ability to pay your mortgage, the SCRA can also require your lender to modify your loan. If you entered active duty with a car loan or another loan secured by personal property, you are also protected from repossession while serving on active duty. A lender must obtain a court order prior to taking action against your property.
Protection From Early Termination of Lease
The SCRA provides servicemembers with the right to terminate residential leases. If you signed a lease for housing prior to active duty, or if you are already active duty and receive orders to PCS or deploy for 90 days or more, then you should be able to terminate your housing lease without penalty. It is important to notify your landlord as soon as you can. Your lease will terminate 30 days after the next due date for your rent. In addition to residential leases, the SCRA also applies to other leases such as those for automobiles and for services like telephone and cable.
The Military Lending Act
The Military Lending Act (MLA) applies to loans and debts incurred while serving on active duty, including Guard and Reserve members on orders of 180 days or more. Under the Military Lending Act, lenders may not charge more than 36% APR on a loan. This includes not only interest, but finance charges, credit insurance, and fees as well. A creditor can also not require you to submit to mandatory arbitration or that you pay the loan through military allotment. Finally, lenders cannot charge a penalty if you pay the loan off early.