ARTICLE
4 minute read•Dec. 6, 2023
If your service member ever gets into financial trouble, it can impact their military career. For this reason, there are two major laws – the Servicemembers Civil Relief Act and the Military Lending Act – that help protect the finances and ease the stress of active-duty service members and their families.
SCRA interest rate limit
The SCRA can help service members who come into the military with high-interest debt. It limits interest rates on debt to 6%, including debt held jointly with a military spouse. The interest rate reduction covers the time when a service member first entered active-duty status to the day they are no longer active.
To get this benefit, your service member must request it in writing from creditors and include a copy of their military orders and any notices extending military service. The legal office of a military installation can determine if your service member qualifies and can help write the letters requesting the 6% cap. Your service member has 180 days from their last day of active service to inform creditors of the change.
SCRA housing protections
These protections in SCRA are known as “the military clause.” If your service member owns a home, it can’t be foreclosed on without a court order, if the mortgage was taken out before being on active duty. If your service member has a rental, they can end leases they signed before active duty.
In addition, if your service member has permanent change of station or deployment orders of at least 90 days, they can end a housing lease without penalties. They need to give their landlord a written notice of lease termination along with a copy of orders or a letter from their commanding officer. Another SCRA benefit: landlords can’t evict active-duty service members or family members without a court order.
More SCRA protections
- Vehicle leases can be ended if your service member is deployed for 180 days or longer after they sign the lease.
- Life insurance is reinstated for nonpayment of premium for two years after military service is completed.
- Your service member can request the postponement of civil court proceedings, such as bankruptcy, divorce or foreclosure, for at least 90 days.
Military Lending Act
The MLA protects your active-duty service member – including National Guard soldiers and reservists on active-duty orders for 30 days or longer – by capping the cost of credit at 36% Military Annual Percentage Rate. Interest, application fees and credit insurance, which pays off debt due to death or makes payments on debt if your service member is disabled, are covered under the MLA. Family members enrolled in the Defense Enrollment Eligibility Reporting System are also covered under MLA.
The MLA covers credit card debt, vehicle title loans, unsecured open lines of credit, refund anticipation loans, installment loans and pawn loans. Loans to purchase or refinance a home are not covered under the MLA, nor are vehicle loans or loans secured by property.
Lenders must disclose both orally and in writing that the Military Annual Percentage Rate is to be applied to the credit being offered, along with a clear description of payment terms. Lenders may not require your service member to waive their legal rights or to submit to arbitration. Lenders also cannot require repayment by military allotment.
Additional information
Learn more about the SCRA and MLA and their important features:
Military members can also reach out to their installation’s personal financial manager or personal financial counselor for more information on protecting their finances and making good financial decisions. Your service member can also contact Military OneSource to speak with a financial counselor.
FAQs
Active duty soldiers are eligible for the Servicemembers' Civil Relief Act starting on the date active duty orders are received and, in limited situations, a soldier's dependents may also be eligible. Protection generally terminates one year after the date of discharge of active duty.
How does the Servicemembers Civil Relief Act protect service members financially during time of active duty or deployment? ›
The SCRA can help service members who come into the military with high-interest debt. It limits interest rates on debt to 6%, including debt held jointly with a military spouse. The interest rate reduction covers the time when a service member first entered active-duty status to the day they are no longer active.
What obligations qualify for SCRA interest rate relief? ›
If the debt is a mortgage, the reduced rate extends for one year after active military service. The reduced interest rate applies to credit card debts, car loans, business obligations, some student loans and other debts, as well as fees, service charges and renewal fees.
Which protections exist under the SCRA JKO answers? ›
The SCRA enables servicemembers to devote their time and attention to the defense needs of the Nation by providing protections related to such things as rental agreements, security deposits, prepaid rent, evictions, installment contracts, credit card interest rates, automobile repossessions, mortgage interest rates, ...
What is the 6 percent rule in SCRA? ›
The Six Percent Rule: An Army Reserve servicemember has the ability to reduce consumer debt and mortgage interest rates to 6% under certain circ*mstances. This applies only to debts and mortgages that were entered into prior to entry on active duty.
Who is not eligible for protection under SCRA? ›
Reservists or National Guard personnel not in an active-duty status are not covered under the SCRA. Also, the statute does not protect retired personnel.
How long does SCRA protection last? ›
The provisions of the SCRA generally end when a servicemember is discharged from active duty or within 90 days of discharge, or when the servicemember dies. Portions of the SCRA also apply to reservists and inductees who have received orders but not yet reported to active duty or induction into the military service.
Does SCRA apply to credit cards after joining? ›
SCRA benefits and protections apply to debts that you incur individually or jointly with your spouse before you enter active duty military service. You may request an interest rate reduction for a credit card account only if you are a signer on the account or otherwise responsible for paying the account balance.
What is the interest rate on a SCRA car loan? ›
Those who work in the auto lending industry should be aware of the following rules and regulations: Interest rates – The SCRA caps interest rate for active-duty servicemembers at 6 percent. Thus, lenders must often adjust interest rates on scra car loan taken out before servicemembers go on active duty.
What loans are not covered by SCRA? ›
What doesn't SCRA cover? A number of financial transactions are not protected, including: New loans or debt: Contracts entered into during your service are not protected by the SCRA. This act applies specifically to loans taken out prior to active service.
By completing the Servicemember's Civil Relief Act Benefits Request form. The benefits request form, along with any required supporting documentation can be emailed to SCRA@HESAA.org or the form can be mailed to PO Box 544, Trenton, NJ 08625 – 0544. You may also fax the benefits request form to 609-588-7285.
What fees are covered under SCRA? ›
Among other things, the SCRA establishes a maximum of 6 percent interest on financial obligations incurred by servicemembers before military service, restricts foreclosures on obligations held or guaranteed by servicemembers, provides protections against default judgments, and permits early termination of certain ...
How do service members qualify for SCRA interest rate relief Quizlet? ›
SCRA relief applies to obligations incurred by servicemembers BEFORE entering active duty. And National Guard members, to qualify for relief, must be called to active duty for a period of more than 30 consecutive days or under Title 10 for any length of time.
Which individual would be covered under the SCRA? ›
Persons who are regular or reserve members of the Army, Navy, Marine Corps, Air Force, or Coast Guard, under a call or order that does not specified period of 30 days or less, or a member serving on active guard or reserve duty.
Are late fees considered interest under SCRA? ›
SERVICEMEMBERS CIVIL RELIEF ACT (SCRA)
The SCRA caps interest rate charges including late and other transaction fees to six percent (6%). The SCRA covers existing debts when a servicemember is on active duty.
Can veterans get SCRA benefits? ›
The SCRA does not cover retired military members, Reserve or Guard members not on active duty or National Guard members activated under state orders.
Who is eligible for SCRA National Guard? ›
National Guard servicemembers on state active duty are eligible for the Servicemembers' Civil Relief Act if they are serving under TITLE 32 under a call to active service by the President or the Secretary of Defense for more than 30 days.
Which of the following audiences are generally eligible for SCRA benefits? ›
SCRA benefits are available to: All active-duty service members of the Army, Navy, Air Force, Marine Corps, Space Force, or Coast Guard.
