Does the SCRA Allow You to Miss Loan Payments?

I was recently contacted by a new military spouse who wanted to know if the Servicemember’s Civil Relief Act allowed his wife to miss a payment on her credit card and avoid paying the associated fees and service charges. Here is the question:

Q: Hey Ryan, my wife got a credit card about 2 months before she left for basic training. She is active duty Army. She was employed before even entering the Army, but left her job about two weeks before leaving for basic.  She didn’t receive pay for 45 days after leaving for basic. In that time her credit card payments were due. Well, with all other expenses she/we didn’t have the funds to make the payment so they charged her a late payments and have reported the missed payment on her credit report, even though they knew of the situation b/c I had called them to keep them up to date. We have her shipment papers showing she was gone and the bank that we have the credit card through can see where we set her direct deposit up, and when the first payment was deposited. Isn’t there something that protects her from this effecting her and her credit and the charges?

A: Thanks for contacting me.The Servicemember’s Civil Relief Act offers a wide range of protections for military members, including some that pertain to loans and interest rates. However, I don’t know if you will be able to get any late fees or interest charges waived in this situation. The SCRA doesn’t eliminate the requirement to make on-time payments for loans entered into before the service. What it does do is allow you to lower your interest rate to 6% for pre-service debt and obligations.

What this means, and what you should do. The SCRA allows you to request that your interest rate be lowered to 6% for all debts incurred before your wife entered the military. This would apply to her credit card, and any other loans she has. Note, this will only apply to loans with her name, this won’t apply to loans that you have only in your name. The lender is required to lower the interest rate to 6%.

This decreased interest rate will only apply to old charges, and will not apply to anything that was put onto the card after she joined the military. But it may help you pay off the credit card balance more quickly. You can contact your base legal department with assistance if your credit card issuer does not readily lower the interest rate. Even though it is the law, some companies push back, either out of ignorance of the law, or because they prefer to use other methods before complying. Don’t let them push you around – this is a law they must comply with!

What about the missed payment? Your best bet would be to contact the lender and ask them to waive the fee and interest charges one time as an act of good faith. Many lenders will do this one time if you otherwise have a good record. You can also offer to set up automatic payments for at least the minimum payment each month, that way he credit card issuer won’t ever have to worry about getting a late payment in the future.

Protect your credit score. You should also request they remove the late payment from your credit report if they are willing to do so. This will help keep your credit score in good standing, as missed payments will hurt your score. Keep in mind that while a missed payment will hurt your score, it won’t necessarily prevent you from opening further lines of credit. Here are tips for improving your credit score, which you may find helpful in this situation. Finally, you should periodically monitor your credit score to see how it is changing. This is good information to have if you are applying for a new credit card or loan. Here is how you can get a free score.

Consider finding a new bank or lender. Finally, you may consider joining a military-friendly bank. These financial institutions offer a wide variety of financial products and services, very competitive rates, and excellent customer service. More importantly, they know what it means to serve, and they are often more lenient with missing a credit card payment one time, or having financial difficulties due to a deployment, temporary duty assignment, or relocation. I recommend looking at your options and seeing if any of those banks meet your needs. Here are some recommended military banks.

I hope you find these tips helpful.

By the way, welcome to the military community! The military truly is a different way of life, and I’m sure there have been some challenges getting acclimated to being a military spouse. I can speak from experience. I was prior active duty Air Force, but I was also a civilian spouse for about a year after I got out of the military. There was a lot I didn’t know, even with my military experience! Thankfully, there are many websites now dedicated to military spouses. Here are a few I recommend looking at for valuable information and for a sense of community:

• MaleMilSpouse.com (formerly Macho Spouse) – a community dedicated to male military spouses.
• MilitarySpouse.com – Tons of great information on PCSing, deployments, career tips, and more.
• SpouseBuzz.com – A Military.com-owned site with lots of great info on military life, family, new laws/policy, and more.

Remember, you can always reach out to the military and military spouse communities for help, large or small. Best of luck to you and your wife in your military journey!