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

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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…

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.

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!

Learn more about getting reduced interest rates through the SCRA.

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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About Ryan Guina

Ryan Guina is the founder and editor of The Military Wallet. He is a writer, small business owner, and entrepreneur. He served over 6 years on active duty in the USAF and is a current member of the IL Air National Guard.

Ryan started The Military Wallet in 2007 after separating from active duty military service and has been writing about financial, small business, and military benefits topics since then. He also writes about personal finance and investing at Cash Money Life.

Ryan uses Personal Capital to track and manage his finances. Personal Capital is a free software program that allows him to track his net worth, balance his investment portfolio, track his income and expenses, and much more. You can open a free Personal Capital account here.

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  1. Jack Henry says

    In July 2019, I entered into a 1-year lease knowing I would be deployed for 4 month around March/April 2020. I did not disclose my deployment to the landlord because they were asking for a 1 year lease and I really needed to find a place. If I had disclosed my deployment before I signed the lease, the landlord would not have offered me the unit. I gave my landlord 45-days notice. Will I be covered through SCRA with no penalties in order to terminate my lease early?

    • Ryan Guina says

      Hello Jack,

      I’d go to your JAG or base legal office. They will be able to answer your questions and help you with any issues your landlord may present.

      As for “knowing” you would be deployed, I would consider rephrasing that to something like, “I had an idea there was a possibility I would be deployed.” After all, deployment rotations can change, even if they are on the books months in advance.

      Best wishes.

  2. Joseph says

    Can I sue a phone company that is trying to make me pay early cancellation fees, when I have military orders to PCS?

    • Ryan Guina says

      Hello Joseph,

      You probably don’t need to sue them. I would contact their customer service department and ask to speak with a supervisor. Explain your situation and mention your orders. If the phone company does not offer the same service in your new location, they should allow you to cancel your service without charge. If they refuse to allow you to cancel your service without the early termination fee (ETF), then contact your base JAG. Your JAG office should be able to draft a legal statement or letter on your behalf informing the company of the requirements under the SCRA, as well as the ramifications of failing to comply with the law.

      If none of that works, then you can ask the JAG for your next steps.

      I wish you the best, and thank you for your service!

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