What is the Servicemembers Civil Relief Act (SCRA)?

The Servicemembers Civil Relief Act (SCRA) is a federal law that protects the financial and legal rights of those serving in the United States military. Originally passed as the Soldiers’ and Sailors’ Civil Relief Act in 1940, it was updated in 2003 and renamed to better reflect its purpose and broad coverage.

The law addresses obligations like housing, loans, contracts and income taxes for active duty servicemembers.

 

What are the Benefits and Protections under the SCRA?

The SCRA provides financial and legal benefits to military personnel so that they can focus on their duties without worrying about their legal and civil obligations back home.

Some benefits and protections under this act include: 

• Interest rate reductions, including on mortgages and credit card debt
• Credit and debt protections
• Legal protections against certain civil and administrative proceedings
• Eviction protection
• Contract termination rights
• Insurance protections 

 

Who is Eligible for SCRA Benefits?

SCRA benefits cover active-duty personnel in various branches and roles within the armed forces. Active-duty status also includes full-time training duty, annual training duty, and attendance at a service school.

Here are the groups that are eligible for benefits:

• Active-duty members of the Army, Marine Corps, Navy, Air Force and Coast Guard.
• Members of the Reserve components actively serving.
• Members of the National Guard mobilized under federal orders for more than 30 consecutive days.
• Commissioned officers of the Public Health Service and the National Oceanic and Atmospheric Administration.

SCRA benefits extend to the spouses and dependents of eligible servicemembers. Additionally, the Military Spouses Residency Relief Act (MSRRA), an amendment to the SCRA, provides military spouses with protections regarding residency, voting and taxes. Legal assistance offices are available to help servicemembers and their families navigate these benefits.  

Does the SCRA Apply to Veterans?

SCRA benefits generally do not apply to veterans or retired military members who have transitioned out of active service. However, veterans may request them if they are called back to active duty.  

 

What Types of Loans Are Covered by SCRA

As mentioned above, the law does cover obligations such as loans. However, a loan must have been taken out before the service member entered active duty.

A variety of loan types are covered under the SCRA, including:

• Credit cards 
• Installment loans 
• Car loans
• Mortgages 
• Home equity loans, including home equity lines of credit (HELOC)
• Loans secured by a deposit account, such as a certificate of deposit (CD)
• Student loans
• Title loans

What is the 6% Rule for the SCRA?   

The SCRA caps interest rates at 6% on any existing loans made to a servicemember prior to being called to active duty. This provision ensures that financial obligations are not materially affected by military service. For mortgages, the reduced rate extends through the period of military service plus one additional year after service ends.

Under this rule, any interest that accumulates above the 6% cap must be permanently forgiven, not just deferred. To take advantage of this benefit, servicemembers need to formally notify each lender. Many lenders facilitate this process through an online application; however, if this option is not available, a written request should be submitted. 

Servicemembers must also provide proof of their active duty status. Lenders are required to comply without changing the original terms of the loan agreement. For example, they cannot accelerate the payment schedule or incorporate the forgiven interest into future loan balances.   

 

Additional SCRA Protections

To support servicemembers in managing their legal and financial obligations, the SCRA provides a range of protections to maintain stability during active duty.

Here are additional protections under the SCRA:

• Foreclosure postponement. Servicemembers are entitled to postponements of foreclosures, which require a court order before any foreclosure action can be taken on mortgages entered into prior to active duty. This protection lasts for nine months following the end of active duty. 
• Income tax deferral. Income taxes can be deferred when military service affects the ability to pay. 
• Home and auto lease termination. Servicemembers can terminate residential and automobile leases without penalty if they receive orders for a permanent change of station or deployment. 
• Repossession protection. Court orders are required before creditors can repossess property, like vehicles, that are secured by purchase contracts made before active duty.
• Protection from default judgments. If a default judgment is entered during active duty, or within 60 days thereafter, servicemembers have the right to reopen and potentially set aside the judgment. 
• Health insurance reinstatement. Upon release from active duty service, health insurance that was terminated during military service must be reinstated. 
• Seizure of property protection. Creditors are required to get a court order before they can seize property secured by a purchase contract made before the servicemember’s active duty.
• Consumer contract terminations. Servicemembers can terminate consumer contracts for mobile phones, internet services, gym memberships and home security services without penalties when they receive orders to relocate or deploy for 90 days or more. 
• Eviction protection. While it does not excuse servicemembers from paying rent, the SCRA protects servicemembers and their dependents from eviction under certain circumstances. These protections can be found under Section 301 (50 USCS § 3951). 
• State and local tax relief. The SCRA states that a nonresident servicemember’s military income and personal property are not subject to state taxation in the state where they are located due to military orders. For assistance determining eligibility, servicemembers should contact their local Staff Judge Advocate General (JAG) office. 
• Professional license portability. This allows servicemembers and their spouses to have some professional licenses from one state considered valid in another state to which they are relocated by military orders. 

 

SCRA FAQs

How Do Servicemembers Qualify for the SCRA? 

Servicemembers qualify by being on active duty or under qualifying federal orders. Proof of active-duty status is required. 

What Accounts Are Eligible for SCRA Interest Rate Reductions? 

Eligible accounts include mortgages, credit cards, auto loans, student loans and certain other debts incurred before active duty. 

Does the SCRA Apply to Spouses and Dependents?

Yes, certain protections extend to spouses and dependents. 

How Long Is the SCRA Good For? 

Most benefits last throughout active duty, and some extend for a specified period after service ends. For example, reduced interest rates on mortgages last an additional year after a veteran leaves active duty.

Does the SCRA Apply to Disabled Veterans? 

In most cases, the SCRA only applies to veterans who are on active duty.

How Long Do You Have to Request SCRA Relief? 

Servicemembers must notify lenders and request SCRA benefits during active duty or shortly thereafter, depending on the benefit. 

City National Bank offers SCRA benefits to protect eligible servicemembers and their families. If your accounts were opened prior to your active duty military service, you may qualify for these benefits. Call us at (800) 773-7100 or contact your Relationship Manager to learn more about how to request benefits and determine your eligibility.