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Servicemembers Civil Relief Act: A Guide To The SCRA Protections And Benefits

Dan Rafter5-minute read

October 14, 2022

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If you're a member of the U.S. Military or reserves, or if you're in the National Guard or other U.S. service organizations, the Servicemembers Civil Relief Act can help protect you from high interest rates, quick foreclosures or other financial penalties.

This act, better known as SCRA, provides a range of financial protections that can pay off if you are struggling to make your mortgage payment each month; are applying for a mortgage, auto or student loan; or are leasing a home or vehicle.

Combined with the zero down payment option that comes with a VA loan insured by the U.S. Department of Veterans Affairs, the SCRA makes buying and owning a home a safer, and more affordable, process for servicemembers.

What Is The Servicemembers Civil Relief Act (SCRA)?

The Servicemembers Civil Relief Act (SCRA) was voted into law by Congress in 2003. The goal was to provide financial protection to active-duty members of the U.S. Military, reserves, Coast Guard, National Guard and other organizations when they are serving the country.

The act caps the interest rates service members pay when applying for auto, mortgage, student and personal loans. This interest rate cap also applies to any credit card debt service members have incurred before joining the military, Coast Guard, National Guard and other qualifying organizations.

If you’re struggling to make your monthly mortgage payments, the SCRA requires lenders to take extra steps before foreclosing on your home. The act also makes it easier for service members to cancel leases, including those on apartments, single-family homes and autos, without facing any financial penalties.

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How Does The SCRA Work?

The SCRA’s benefits mostly apply when service members are borrowing money or paying back their debt.

SCRA Requirements And Eligibility

The SCRA covers active-duty members of the Army, Navy, Marines, Air Force and Coast Guard. The act also covers members of the military reserves when they are serving on active duty and members of the National Guard when they are mobilized for 30 or more consecutive days.

Even active-duty officers of the Public Health Service or the National Oceanic and Atmospheric Administration receive the financial protections of the act.

It's important to note, though, that the benefits of the SCRA are only available to those who are on active-duty service. The act does not cover veterans of these military units or organizations.

If you are the child of an active-duty service member or married to a member, the protections of the SCRA might also apply to you. The key is that your spouse or parent must be on active duty.

You might also qualify for SCRA benefits if an active-duty service member provides financial support for you. According to the act, you'll qualify for SCRA benefits if this active-duty service member has been providing more than half of your financial support in the 180 days before you apply for one of the financial protections of the act.

If you are applying as a child of an active-duty service member, you'll typically need to be under 18 and not married to receive any SCRA benefits.

SCRA Protections And Benefits

There are several key benefits provided by the SCRA. These include:

  • Interest rate caps: Any debt that you took on before joining the military, reserves, Coast Guard, National Guard or other qualifying organizations must be capped with an interest rate of 6%. This holds no matter what the original interest rate of this debt was. The capped interest rate will stay in place while you are on active duty. You’ll qualify for the rate cap on most forms of debt, including home equity loans, home equity lines of credit (HELOCs), credit cards, auto loans, mortgage loans, student loans and personal loans.

  • Foreclosure and eviction protection: Struggling to make your mortgage payments on your conventional loan, VA loan, FHA loan or other type of home loan on time? Worried that you might lose your home to foreclosure? The SCRA can provide relief. Under the act, if you took out your mortgage loan before entering active-duty service, your lender is not allowed to foreclose on you without first filing a valid court order. Filing this will slow the time it takes a lender to initiate foreclosure proceedings. This protection, too, lasts while you are on active duty and for an additional 12 months after you leave the military, reserves, National Guard, Coast Guard or other qualifying organization.

  • Lease protection: Under the SCRA, service members can cancel all leases without any financial penalties if they are being deployed for 90 days or more. This includes leases for vehicles, apartments, and single-family homes. Service members must have signed their leases before they were called into active duty to qualify for this protection.

  • Contract protection: The SCRA also allows members to cancel contracts with service providers without financial penalty. This includes contracts that members have entered into with telephone, Internet, cable and other providers. As with the SCRA’s lease protection benefit, service members must have signed these contracts before they were called into active duty.

  • Insurance protection: Service members can also cancel any contracts they signed with insurance providers without penalty, thanks to the SCRA. This holds for policies that service members have taken out with life, auto, health and other insurance providers. Again, service members must have signed these policies before being called into active-duty service.

  • Default judgments protection: In a default judgment, a court order favors the person or party suing you if you do not appear in court to defend yourself. This could be a serious problem for active duty service members. If you are serving your country, you might not be able to appear in court.

Under the SCRA, though, if you are on active-duty service and can't appear in court to defend yourself in a civil action, the court is not allowed to make a default judgment against you until it first appoints an attorney to serve as your defense.

The act stipulates that the party filing a lawsuit against you must file an affidavit with the court declaring whether you are on active-duty service. The act also states that the court must allow a delay of the case for at least 90 days.

How Do You Apply For SCRA Benefits?

If you want to receive a benefit outlined in the SCRA, you must request it with a lender, court, credit provider, insurance company or other organization and verify your active-duty status.

Say you want to reduce the interest rate on your credit card from 18% to the 6% rate guaranteed by the SCRA. You'll need to write a letter to your credit card provider stating your account number, the start date of your active-duty service and a written request saying that you want to reduce your interest rate.

You must provide a copy of your active-duty orders to your credit card issuer to prove that you are being called into service. You can get form letter templates for this from your on-base legal office.

Or maybe you want to cancel an apartment lease without having to pay any cancellation penalties. You'll need to write a letter to your landlord, including the date of your active-duty service. Again, you'll usually need to send a copy of your active-duty orders to your landlord.

Be aware, though, that lenders, landlords and credit card providers might have different policies regarding how service members should apply for SCRA benefits. Call your financial providers, insurance providers or other organizations first to ask about how to file for these benefits.

The Bottom Line

The SCRA provides important protections for active-duty service members. If you are applying for a loan or new credit, it makes financial sense to apply for the interest rate cap provided through the act. It’s important, too, to turn to the act’s protections if you want to cancel a lease or you are facing foreclosure on your home. If you are an active-duty service member ready to make the move to owning a home, get started on a mortgage application with Rocket Mortgage® to see if you qualify for a VA or other type of home loan.

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Dan Rafter

Dan Rafter has been writing about personal finance for more than 15 years. He's written for publications ranging from the Chicago Tribune and Washington Post to Wise Bread, RocketMortgage.com and RocketHQ.com.