What Is The SCRA And How Does It Protect Service Members?

The Servicemembers Civil Relief Act—known as the SCRA—is a comprehensive list of benefits and securities for service members of the United States Military and various other reserve groups. The groups covered under the SCRA are:

• Full-time active-duty members of the five military branches (Army, Navy, Air Force, Marine Corps, and Coast Guard)
• Reservists on federal active duty
• Members of the National Guard on federal orders for more than 30 days
• Servicemembers absent from duty for a lawful cause or because of sickness, wounds, or leave
• Commissioned officers in active service of the Public Health Service (PHS) or the National Oceanic and Atmospheric Administration (NOAA)

The goal of this Money Chat is to help you understand the basics of how the SCRA began, what benefits it provides active duty service members, what the extent of those benefits is, and potential upcoming changes to the SCRA. 

History of the SCRA

The SCRA is a fairly straightforward addition to the established Soldiers’ and Sailors’ Civil Relief Act (SSCRA) of 1940. In 2003, President George W. Bush signed into law the SCRA which revised and expanded upon protections of the original bill. Most notably, the bill was revised to “clarify the language of the SSCRA and to update the law to reflect new developments in American life since 1940.” 

One substantial change was that the revised SCRA would cover both reservists and National Guard soldiers if activated. In the original bill, due to the joint control over the National Guard and reserves under state and federal law, reserve members were excluded from protections. 

In addition to active duty service members, the SCRA also extends certain protections towards servicemember dependents. Those who cosigned a loan for, or took out a loan with a servicemember are also extended the same protections under the SCRA. A dependent is defined as someone who is a spouse, child, or any other person who has received half of the servicemember’s financial support over the last 180 days. 

Specific SCRA protections for active-duty members begin the day they enter active duty. For reserve members, it begins the day they receive certain military orders. 

SCRA List of Benefits

There are six primary protections under the SCRA all having to do primarily with debt relief for active-duty members. In the original bill, it was apparent that soldiers, while fighting overseas, could not keep up with mortgages, debts, or any other financial burdens. Under the current version of the bill, certain protections stem more from predatory debt collection practices rather than assuming the service member cannot communicate properly during times of active service. 

The list of protections are as follows:

The Six Percent Rule

The SCRA caps the total interest a service member can be charged on any kind of loan at 6% per year during their active duty service. This protection extends to all loans the servicemember may have and can include loans that began before active duty service. In the case of limiting active loans before service, the servicemember must provide the original creditor with written notice and a copy of their military orders. 

In the case of mortgages, service members are protected for an extended period as their mortgage interest is capped at 6% for the duration of their active duty status and an entire year afterward. 

In 2008, President Bush signed into law the Higher Education Opportunity Act that also extended the Six Percent Rule to federally guaranteed student loans. Should a student have several different kinds of federally guaranteed loans, they can combine the debt into one loan that is then protected under the SCRA’s interest caps. 

The types of loans covered under the SCRA are credit card loans, automobile, ATV, boat, and other vehicle loans, mortgages and home equity loans, and student loans. 

Delay Court Proceedings

Known as the protection against default judgments, this SCRA protection guarantees that should an active duty service member not be able to make an appearance, a court may not enter a default judgment against that servicemember until an attorney is appointed to represent the interests of that service member. 

Typically, this situation would not occur as before any court proceedings are ordered, it is determined whether or not the defendant is in active duty military service. But should their active duty status be questioned, the SCRA does provide a database to determine if the defendant is currently serving or not should they be legally required to provide the information. 

Protection From Foreclosures

In addition to the interest rate caps on mortgages, the SCRA also protects servicemembers from foreclosures in a similar manner. Should a servicemember take out an “obligation on real or personal property” before entering military service, during their active duty status, and for one full year afterward, a creditor must get a court order before foreclosing on a mortgage or a property. 

Unlike some other protections, a violation of this specific foreclosure protection could result in one-year imprisonment and fines against the creditor. The “tail period” or the extension after active duty service, has changed dramatically over time ranging from just 90 days to now one year. In 2018, President Donald Trump signed into law the Economic Growth, Regulatory Relief, and Consumer Protection Act, which made the one-year extension permanent. 

As an additional caveat to the protection, judges may also issue a stay on a non-judicial foreclosure or even adjust the payments should the servicemember’s active duty status impact their ability to meet previous obligations.

Protections Against Repossessions

A creditor may not repossess a vehicle during a servicemember’s active duty service without a court order as long as they either placed a deposit for the vehicle or made at least one installment payment on the contract before entering military service. 

Lease Termination Clauses

Before deployment, the SCRA requires a servicemember’s premises to be occupied by a servicemember or their dependents. Should they plan on returning to their apartment or leased home, the same protections apply. This protection mainly stems from deployment changes that would revise where a servicemember would return to after their active duty service. Should they provide written notice and a copy of their military orders, the servicemember under the SCRA may terminate their lease after the next month’s payment. Should the servicemember die during deployment, their spouse or dependents may terminate the lease within one year. 

This protection is typically seen in scenarios where the service member receives a Permanent Change of Station or PCS. Should they receive a PCS for longer than 90 days, they have the right to terminate existing leases without incurring any larger penalties. 

Enforcement Of Storage Liens

Servicemembers are protected from liens against their storage facility or tow companies during their active duty service. Should a tow company look to move a car, or should a storage facility try to repossess the storage locker, they must go through a court order. 

Future Changes

In March 2021, an amendment to the Fair Debt Collections Practices Act was unanimously passed through the House of Representatives. The Fair Debt Collection Practices for Servicemembers Act would prohibit collection agencies from insinuating that not paying debts would result in a reduction of rank, revocation of security clearance, or military prosecution. In addition, it would prohibit collection agencies from communicating with service members’ superiors. After it passed through the House, it was referred to the Senate Committee on Banking, Housing and Urban Affairs where it still has yet to be read. However, due to its unanimous passing through the House, the amendment is expected to pass in the Senate. While not directly related to the SCRA, civilian FDCPA protections are often also granted to active duty members in conjunction with the SCRA.

Another change working its way through Congress is the National Defense Authorization Act. Amongst hundreds of other changes, the NDAA would amend the SCRA to change two key aspects of the legislation. The NDAA would add an arbitration clause to the SCRA that requires post-dispute written consent to use arbitration whenever a controversy occurs over a contract with a service member. The NDAA would also institute an amended waiver clause under the SCRA. Currently, a servicemember may waive any SCRA protections but under the amended rule, service members could only waive their protections after a specific dispute has arisen and they must identify the dispute on record. 

These two additional protections under the proposed legislation—which passed the House earlier in 2021 and was read into the Senate in December 2021—would combine with other proposed changes like the FDCPA for Servicemembers to ensure that collection agencies could not leverage debt against a servicemember or insinuate that their military status would change because of certain debts. 

The SCRA is a complicated piece of legislation and provides six key benefits to service members in the United States Military and reserves. These benefits extend beyond original creditors and apply directly to third-party collection agencies. For more information on the specifics of the SCRA, visit the SCRA portal website. 

Additional Resources

If you want to learn more about financial literacy or your rights as a consumer, please visit the Receivables Info Resources Page.

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The information contained in this article is meant to serve as general guidance for consumers and not meant to serve as comprehensive financial advice. For questions about your circumstance, finances, or accounts, please contact your creditor(s) and/or financial advisor directly.

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