Servicemembers Civil Relief Act – Military Members Can Receive Reduced Interest Rates

In 2003, President Bush signed into law the Servicemembers Civil Relief Act (SCRA). The SCRA further clarified and solidified the Soldiers and Sailors Civil Relief Act (SSCRA) which benefits active duty military members and was signed into law in 1940. The bill was most recently updated in 2012, which can be found here.

Servicemembers Civil Relief Act

There are many benefits that servicemembers can receive as under this law.

  • 6% cap on interest rates for pre-service debt and obligations
  • Delay of all legal civil actions during time of war
  • Requiring court action before servicemember or family can be evicted from a rental property if the rent is less than $2900 (adjusted annual for inflation)
  • Termination of pre-service residential lease, or termination of lease in the event of a Permanent Change of Station (PCS) or deployment longer than 90 days.
  • Termination of auto lease under certain circumstances
  • Guard and Reserve benefits

Interest Rate Reduction: To cap interest rates on debts or obligations to 6% per year, the debt must have been incurred before the servicemember entered military service. This can include credit card debt, car loans, student loans, mortgage payments, etc. This is not a deferral of interest, but an actual reduction. This does not apply to any debt received after joining the military. To reduce your interest, you must contact the financial institution in writing and provide them with a copy of your orders. This reduced interest rate will only apply while the member is still in the service, so pay it off quickly!

Delay of Civil Actions: In a time of war, soldiers who deploy can delay legal civil actions against them until they return home from the war. These can include bankruptcy, foreclosure, and divorce proceedings. This was enacted to allow the soldier to concentrate on the war effort, and not have to focus on legal proceedings back home. (My guess is they still worry about it, they just won’t have to deal with the legal proceedings until they return home).





Court Action to Evict: During time of war, servicemembers’ families cannot be evicted from a rental property if the rent is less than $2400 monthly. This is to prevent the servicemember from dealing with an eviction while he is off doing his duty for his country. There is an escalator clause which will provide for increases to the rent ceiling in future years.

Termination of Residential Lease: Servicemembers can break a pre-service lease without penalty when they join the service. This is an obvious law which prevents new recruits from being penalized upon joining the military. The new law formally recognizes what was commonly written into lease agreements as a ‘military clause.’ The military clause allowed the servicemember to break his lease without penalty for PCS or deployments longer than 90 days. The military clause is no longer required in a lease agreement because it is now a law.

Termination of Auto Lease: The servicemember and his family can terminate auto leases if he receives PCS orders overseas, or deployment orders for 180 days or more.

Guard and Reserve Benefits: All of these laws apply to the Guard and Reserve, but there are a few small differences. The Guard must be activated for a minimum of 30 days to be eligible. Guard and Reserve members can also terminate auto leases if they are activated for 180 days or more. The law does not state they must be deployed.

Get out of Cell Phone Contracts. The SCRA doesn’t specifically allow service members to cancel their cell phone contracts at will, but there are several ways for military members to cancel cell phone contracts or to cancel your cell phone contract without any fees.

And More… There are many other benefits that can be found within the SCRA. Contact your base legal department for more information, or read here. If you are considering joining the military, talk to a recruiter. (But remember, recruiters are not legal aides. Request them to direct you to someone who knows the facts!).

Image credit, Department of Justice (image in public domain).




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Date published: December 12, 2007. Last updated: December 18, 2012.

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Ryan Guina is the founder and editor of this site. He is a writer, small business owner, and entrepreneur. He served over 6 years in the USAF and also writes about money management, small business, and career topics at Cash Money Life. You can also see his profile on Google

Comments

  1. what about military members who get orders for overseas for 3-4 years and have a car loan not a lease? None of the websites I have visited have addressed this problem.

    • Good question, Justin. It depends on the terms of your loan. Some lenders will not allow you to take your car overseas while there is still a loan on it. I recommend contacting your lender for more information about that aspect.

      Can you lower the interest rate if you move overseas? Again, I am not sure. If you had the loan before you joined the military, then probably. If you got the loan after you joined, then maybe not.

      I know this is not a concrete answer, but there are details I don’t know, and other circumstances that may come into play. Your best bet is to contact your lender, and possibly your base legal office.

      Good luck, and thanks for serving! :-)

  2. someone told me that while i was deployed i could get my intrest rate redueced on my current car loan. is this true even if i purchased it ofter i joined the army?

  3. Adrienne Berg says:

    Can you please tell me if the 2003 SCRA signed by Bush on section 533 for home foreclosure that is now 9 months after deployment is going to be 3 months again. (because it was due to expire on Dec 2010) Will it be revised again for 9 months or go back to 3 months.

    Thank You

  4. Melvin rosado says:

    I will be deploying soon. I’m in the guard and just leased a brand new car. May I terminate my lease without getting penalized for it?

    • Melvin, these situations are often on a case by case basis. generally if you are deploying for a long term assignment or moving overseas, then you would be able to. But if you just want out of a lease because you don’t want to be in it any more and you aren’t physically leaving the area, then you may not be able to. My recommendation is to contact the dealership where you have your lease or contact your base legal department. Best of luck.

  5. Moses Briseno says:

    If I’m active duty and I receive orders to deploy to Iraq and Afghanistan I’m I eligible to receive the soldiers and sailors act while i’m deployed? I’m having a difficult time receiving an answer. Can you please respond to me in a timely manner since I will be leaving soon. Thank you for your time

    • Moses,

      Thank you for contacting me. It depends on what we are talking about. If it is a legal proceeding, then yes, these protections would apply when you deploy. If we are talking about debt, then it depends. If the debts were incurred before you joined the service, then you can get all of those reduced. If the debts were incurred after you joined the service, then I’m not positive. However, some financial institutions will give service members a break while they are deployed, either by reducing interest rates while you are deployed, or reducing minimum payments. This is a case where it pays to give your lender a call and see what they can do for you. Additionally, if you are looking at credit cards, then I recommend looking at these 0% Balance Transfer Credit Cards, which allow you to transfer your balances to a 0% interest rate to help you pay them off more quickly.

      Best of luck and thanks for your service!

  6. Hey , I’m deploying to afhganistan in the fall but I finance a car in december last year, I have no body to look after or when I’m gone . Can I return my car to the dealer where I bought from without getting penalize …. It’s a finance not a lease so I’m worry cuz I havent find no answer yet

    • Ronny, I don’t believe you will be able to return the vehicle since it is a purchase and not a lease. I recommend looking into a long term storage arrangement, or you could try to sell it if you don’t want to put it in storage. Best of luck on your deployment and thanks for your service!

  7. Jonathan Frank says:

    I leased a Honda two weeks ago and everything was fine until last night when the dealership called me and said that Honda has decided to not lease me the car since I am in the military. They are now giving me the option to buy the car instead of leasing. That is not something I am interested in doing. Have you ever dealt with anything like this? What options do I have?

    • Jonathan, I am not aware of any legal recourse a company has to cancel a lease simply because you are in the military. It’s possible it could even be against the law, but I don’t know for certain.

      The first thing I would do is contact your base legal office and see if your judge advocates have any advice for you. Many times the base legal departments don’t get involved with these things, but in other cases they may be able to at least give you advice on what the law states.

      Beyond that, my recommendation is to thoroughly read your lease agreement and look for any clauses which might relate to military service and/or the ability of the leasing company to cancel the lease.

      And I certainly wouldn’t buy a car simply because they prefer to sell you a car versus lease you a car. If they insist on having your return the car, then offer to return it to them for a 100% credit of your money including all signing costs, down payments, taxes, etc. (make sure you aren’t out a single cent when it is all said and done).

      Then take your business elsewhere – they don’t deserve your business if they insist on treating you that way.

  8. pablo garcia says:

    I am about to deploy to aghanistan. Can I used the SCRA 2003 to lower my interest to 6&?

    • Hello Pablo, the 6% interest rate only applies to loans you took out before you joined the military; it does not apply to any loans you took out after you joined the military.

      So the short answer is, if you had the loan before you signed up, then yes, it should apply, and the lower interest rate should be in effect until you separate from the military. If you took out the loan after you joined, then you may not be able to reduce your interest rate.

      That said, I recommend contacting your lender to see if they can work with you. Some lenders will reduce interest rates while the borrower is deployed. It doesn’t hurt to ask.

  9. I am supposed to deploy to afganistan in january, and from what i have read the only way to get out of my car lease is only if your orders are for 180 days or more. Is this a true statement because i know in some cases your orders will say 179 days for a 6 month deployment. Thank your for your help.

  10. My husband went into basic training on the 31st of October. By the time he got the first half check we were two payments behind on our vehicle payment. Now we are four payments behind waiting on a bank loan and another full check to get caught up. They are threatening to have my vehicle repoed due to not being able to pay a full 200.00 payment. What can I do? Is there anything that protects us from this happening?

    • Candace,

      My recommendation is to contact your lender and let them know the full situation – what is happening and why. Many lenders are understanding when they know they will get their money.

      You can also talk to them about reducing your interest rate if it is above 6%.

      The most important thing you can do right now to avoid a repo is to open the lines of communication.

  11. miguel carmona says:

    to candace dec 8 2011 posting. …. contact lender, advise of situation, request assistance for a 2month deferment or even a 3month deferement.

  12. miguel carmona says:

    or go to your local VFW american legion post and ask for assistance. online look for veterans assistance grant application …the grant is for $1000.00 dd 214 and military id will be needed. at least in the state of texas. not sure on your state. hope this helps others also.

  13. Hey Ryan…I found this very informative. I know you said that even if the lease does not have a military clause, we are still protected under this act but what if our lease does have a military clause but it states that the active duty member can only break the lease on PCS or deployment order but not on ETS orders? Our landlord said that if our orders do not say PCS that we are responsible for the remainder of our lease but we don’t plan on staying here when my husband ETS’. Our we still covered by this act with ETS orders?

    • Marissa, to be honest, I don’t have a clear answer for you. I would think that the lease you signed is designed to protect both parties in the event you are required to move for a PCS or deployment, but an ETS doesn’t fall into that situation. Your best bet may be to contact your base legal department for clarification. You can also try contacting your landlord and asking him/her if you can come up with a solution that works for everyone. Some people are willing to work with you if you give them enough notice. Best of luck.

      • Yeah I talked to our landlord and she said unless it states PCS orders that we have to pay over 2 grand for the remainder of our lease. I asked her what she did with military members who were retiring and returning to her home of record but she said it didn’t matter. I didn’t think it was fair at all because a active duty member should not be confined to a state due to an apartment lease, especially if the active duty member completed the terms of his contract with the military. My husband and I are originally from Hawaii but our home of record is Alaska. There are no jobs here where we are at so we need to move where we can get steady income. Especially having three little ones to take care of. I talked to another tenant who was a JAG officer and she said that we can get our orders to state PCS/ETS but not sure who we talk to for that. I just hope we don’t get stuck here in this state…we need some place warm. lol

  14. Hello Ryan,

    My landlord is withholding our security depost because we terminated our rental agreement. We gave the proper written notice and supplied him with all of the PCS paperwork. However, he is saying that because on the PCS forms it states in section (b)”you are not authorized shipment of household goods and relocation of family members” that we are not covered by the SCRA. He also talked to my boss whose phone number was on the PCS paperwork who told him that we are choosing to move, and that terminating our lease is optional because I was relocated only 35 miles away. It seems like this is false and that I should be covered by the SCRA and allowed to terminate my lease due to PCS therefore getting my security deposit back. Our landlord isn’t charging us for unpaid rent but said that our rental agreement clearly states that termination of the lease before the term is us up will forfeit our security deposit. Do you know the answer to this?

    Thank you,
    Drew

    • Drew,

      This is a tricky situation, and will likely boil down to how your PCS orders are interpreted. I recommend contacting your base legal office or JAG office to see if they can assist you with this matter. They will be able to review you lease contract and your PCS orders and give you the best course of action.

      Best of luck, and thanks for your service!

  15. Hi Ryan,
    My husband just recieved a letter in the mail regarding a small claims judgement against him from a cable provider. He called to cancel service before he PCS’d but we just got word that he owes over $800 in back pay and accumulated interest. I am writing to them and including his Orders. But I am wondering if this Act covers breaking cable contracts. ??? Hoping to get some clarification before I send all the paperwork off.
    Thanks in advance for your knowledge and time.
    Bre

    • Hi Bre, I’m not 100% certain if this covers breaking cable contracts, but it is definitely worth pursuing. Many cable providers have clauses in their contracts which allow you to break the contract when you move, and do so without any penalty if you move to an area which they do not serve. It’s unfortunate that they sent a small claims judgment, though, as it seems like they took this to court where the judge made the decision in his absence – if this is the case, it could complicate things. I recommend seeking counsel from your base legal department and trying to resolve this over the phone with customer service instead of via mail – it will be much easier if you can explain things to someone over the phone versus trying to explain it in a letter. You can always scan and e-mail or fax a copy of his orders if they need a copy.

  16. My fiancé and I started renting an apartment September 2011 and I left for basic training, airborne school and ranger training January 9th 2012 and am still down here training until October. I went into the landlords office to speak with them, let them know I was leaving and that we needed to break the lease. At the time I was pretty sure they were obligated to release us from the lease. The landlord said she didn’t have to and that all she could do was sign me off the lease and it would be solely in my fiance’s name. Seeing as I make far less in the military than i did at my former job, we’ve been struggling to pay bills and have even resorted to loans to pay for things and going into my fiance’s college fund. She goes to school full time and works part time so she doesn’t make very much and neither do I. Not only has not being able to terminate the lease stressed us financially, its taken an emotional toll on my fiancé as well. The rent alone in the last 6 months has been nearly $4000 and that’s not including all the bills that go along with the apartment. I was wondering if there was any legal action we could take against the property management because I read that in 2003 George Bush passed a law stating military members can terminate leases if they are gone for an extended period of time. So in essence they broke the law but not allowing us out of the apartment and putting us in hard times financially.

    – Robert Nourse

    • Robert, try contacting your base legal department for assistance. They will be able to help you better understand the terms of your lease and whether or not you have a legal recourse for getting out of the lease without penalties. If your fiance’s name is on the lease as well, then it could complicate things. The best thing to do is seek professional assistance from your base legal department.

  17. Fayvado says:

    Hi Ryan,

    I am a Reservist that was activated from 2007 to 2009. At that time I did get the Soldiers and Sailors Civil Relief Act applied to my credit cards. Some even lowered my rate to 0%.

    It is now 2012 and I am just realizing that one of my cards is still 0%. I did not notice early because I no longer get paper statements but e-statements for that particular credit card. Since using the e-statement option, I did not review the statements but just paid the balance off usually by paying 1/3 or 1/2 of the full balance. I have been paying the bill this way for the 3 years.

    I want to call the credit card company and explain my dilemma but I am worried about the past interest amount. That would cause me hardship. I am liable? I did submit orders that stated my ending date of active duty service. Also I do have another card with the same company that did revert back to the correct interest rate after the end of my active duty period.

    Faye

  18. i will be deploying for a year in dec to afghanistan and i have a legal issue can my lawyer delay the process untill i return. the charge is for delaying an officer not a heavy charge but i’m fighting it because it was not justified and the deputies abused there power.

    • You may be able to delay the judgment. I recommend speaking with your base legal department or your lawyer for legal guidance.

      Best of luck on your deployment and thanks for your service.

  19. Hi…my family and I just moved to our new duty station….i am a active duty marine… We rented a home and 2 months later a sheriff came and served papers to us and told us the date of the sheriffs auction of the house. Can we break our lease? This is causing alot of emotional stress on my family…the landlord changed all phone numbers and emails without even telling us…we had to do research to find his new one and all he can tell us is I am checking into it. Since it is at this stage and we have only been in the house for 2 months that he signed a lease with us knowing that he was not making mortgage payments…what can we do…we would just like to break the lease and move on to a more stable situation for my family. Thank you…

    • Shaun, I believe you can break your lease, but I recommend scheduling a visit with your base legal office for more specific information. Each state has different laws, so you it is best to get legal counsel. Best of luck, and thanks for your service.

  20. STEVEN MILLER says:

    I’m deploying over seas in October. While I am clear on my rights at my job upon returning I am confused about the rights of reservist and gaurdsman who are being called up and need time to get things at home straightened out for their families and household before they leave. I have found many forums discussing the rights of the servicemembers spouse being able to take a leave of absents from their jobs but nothing about the servicemembert being able to do this. Is there something i can read or send my work so i can do the same. I am very distressed about this and was even told by my employer that they had no idea of any document which allowed me to take off work before being deployed. I understand that most employers are sympathetic to servicemembers and would allow them time off work, however i do wish something in writing would help me feel better about doing so, and not leave any questions about reprecutions for taking this time off work.

    • Steven, To be honest, I don’t know of any specific document for this topic. My recommendation is to try and work something out with your employer, or use your vacation time to take care of things as needed. You can also try to work off shifts if you need to make appointments in the day time, or volunteer for weekends or other shifts to take care of your personal business as needed. The most important thing is to keep the lines of communication open with you employer and your unit.

      You may also wish to talk to people in your unit about how they handle these situation. best of luck, and thanks for your service.

  21. I really need to know if there is anything you can do to reduce the interest on a private student loan. My husband had already been active duty Army and then got out when he obtained a large private student loan. After he joined the National Guard (after the student loan was taken out). I think the loan was taken out in 2003 then he was deployed in 2008, and continued to pay the huge payments with no breaks on the interest. We went through a bankruptcy and haven’t been able to pay on this loan in two year and its now in collections. I wasn’t in the picture when the loan occurred and now the collection agency is trying to scare me into allowing them to take automatic payment from my checking account! The interest and late penalties are so high this loan in now $10000 more than was borrowed. I guess what i want to know is, is there anything that can be done to help lower the amount owed so that one day my husband and I might actually be out of debt? Thanks

  22. In 2009 I broke my lease at my apartment complex in Texas by using the military clause in my lease. I had received TDY orders for 114 days in Georgia to be attached to another unit for training. Years later I am encounting a collection agency trying to collect on this, even though I did the right thing toward closing out my lease. I no longer have any paperwork regarding that lease, and when I requested debt validation they merely sent me the first and last page of the lease and a standard unsigned statement of charges. I’m still active and in Georgia. Do I have any rights regarding this?

    • Fred, If you are still in the military, I would contact your base legal office and have them assist you. A record of your previous orders may be helpful. If you are no longer in the military, then you may need to hire a lawyer to help you. This is something you definitely want off your record – not just for the expense they are trying to collect, but because it can affect your credit score.

  23. Hi Ryan,

    I was hoping to get your help on this. I tried to post it a few days ago, however, the entry never made it.

    My husband is in the reserves and being called to active duty. He and I are both co-signers a 2 yr lease with 7 months remaining. We want to get out of the lease and are telling our landlord that my husband is being called into active duty. I have independent income and am not moving with my husband for now.

    Given that both or our names are on the lease and that only one of us is being called to active duty, do we have a case in court or could the landlord take us to small claims court for breaking the lease 6 months early?

    thanks

    • Elisabeth, In your case, I don’t know, since you are both cosigners on the lease. I recommend you consult with your base legal counsel for more information. Most Guard/Reserve units are able to offer assistance for these types of inquiries, especially when members are being activated for deployments.

  24. Hello sir, i have been reading on the the SCRA and i know the 6% interest cap applies to Active duty. The question i guess im asking is , im deployed, are my loans interest rate able to get to 0% or is it still only 6% pd.? These interest im asking about is for my direct loans i took out for from college.

    • Will, I don’t know anything about the interest rates being reduced to 0% unless it is the policy of a specific lender. You will need to ask your lender if they have any specific policies for deployed servicemembers. Best of luck, and thanks for your service.

  25. Aaron Perry says:

    I am on active duty and about to deploy in three weeks. My dillema is our lease ends in October while I will still be deployed. The homeowner is wanting to move back into the house once the lease ends. Can they make my wife and children move out once our lease ends even with me still being deployed?

    • Aaron, To be honest, I don’t have a firm answer for you. It probably depends on your lease agreement and state laws. My recommendation is to speak with your landlord about the situation and see if you can come to an agreement to either: 1) break your lease early so you can move your family before you deploy, or 2) extend your lease until you return.

      If your landlord isn’t willing to work with you, then I recommend speaking to your base legal counsel, or First Sergeant to see what options you have. Your unit may be able to help organize some people who remained behind to help your wife and family move into a new house or apartment. Since you are deploying soon, I recommend moving very quickly on this.

      I wish you the best of luck with this situation, and with your deployment. Thanks for your service!

  26. Air Force Retired says:

    What if you received SCRA benefits and a check from a creditor for interest throughout a car loan or personal loan even though you aren’t eligible because the credit or loan was established after joining the service. What happens next?

  27. I am currently deployed to Afghanistan and some medical bills that hadn’t been sent to me before I left have been sent to collections. My mom didn’t tell me about the bills, she didn’t want to open my mail, until she noticed a collections one. Am I covered under this act to have it take off of my credit report if I pay it when I get home? I just am afraid of it having an impact on my credit.

  28. Justin Loucks says:

    If I am about to ets out of the military, and I have a lease with my apt complex till Oct. Will I be able to break my lease with my ets orders?

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