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, and can be found here. 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 some 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 $3,851 (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! Learn more about getting reduced interest rates through the SCRA. Delay of Civil Actions: In a time of war, soldiers who deploy can delay some 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 $3,851 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).