If you are active duty (or were on active duty) and are having problems with a home foreclosure, an installment contract, or other financial matters, Uncle Sam has got your back. Do you now about the “Servicemembers Civil Relief Act of 2003 (SCRA)”?
Servicemembers Civil Relief Act of 2003 (SCRA) formerly known as the Soldiers’ and Sailors’ Civil Relief Act of 1940 (SSCRA) is a federal law that gives all military members some important rights as they enter active duty. It covers such issues as rental agreements, security deposits, prepaid rent, eviction, installment contracts, credit card interest rates, mortgage interest rates, mortgage foreclosure, civil judicial proceedings, and income tax payments. It also provides many important protections to military members while on active duty.
The SCRA protects active duty military members and reservists or members of the National Guard called to active duty (starting on the date active duty orders are received) and, in limited situations, dependents of military members (e.g., certain eviction actions).
To receive protection under some parts of the SCRA, the member must be prepared to show that military service has had a “material effect” on the legal or financial matter involved. Protection under the SCRA must be requested during the member’s military duty or within 30 to 180 days after military service ends, depending on the protection being requested.
In many situations, the SCRA protections are not automatic, but require some action to invoke the Act. For example, to obtain a reduction of your pre-active duty mortgage or credit card interest rates, you should send your lender/creditor a written request and a copy of your mobilization orders.
Legal advice available. If you think that you have rights under the SCRA that may have been violated, or that you are entitled to be shielded from a legal proceeding or financial obligation by the SCRA protections, you should discuss the matter with a legal assistance attorney or a civilian lawyer as soon as possible.
The Six Percent Rule
For example, one of the most widely known benefits under the SSCRA and now the SCRA is the ability to reduce pre-service consumer debt and mortgage interest rates to 6% under certain circumstances. How does the 6 % interest rule work?
Consider this example: Three months ago Mr. Smith and his wife bought a car for $13,000, paying $1,000 down and financing $12,000 at 9% interest. Last week, Mr. Smith was called to active duty as Staff Sergeant (SSG) Smith. Before entering active duty Mr. Smith earned $42,000 per year. As a staff sergeant he now earns almost $27,000 (a staff sergeant with over 12 years of military service from Defense Finance & Accounting Service pay scale. Because of the SCRA, SSG Smith may ask the car financing company to lower the interest rate to 6% while he is on active duty — military service has materially affected his ability to pay since he is earning less money on active duty than before. SSG Smith should inform the finance company of his situation in writing with a copy of the orders to active duty attached, and request immediate confirmation that they have lowered his interest rate to 6% under the SCRA. The finance company must adjust the interest down to 6% unless it goes to court. In court, the finance company, not SSG Smith, would have to prove that