How You Can Benefit From the SCRA

How You Can Benefit From the SCRA
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(This article by Kimberly Lankford originally appeared in the February 2022 issue of Military Officer, a magazine available to all MOAA Premium and Life members. Learn more about the magazine here; learn more about joining MOAA here.)


The Servicemembers Civil Relief Act (SCRA) provides several legal protections for servicemembers, including special rules that can help them save money on loans and deal with complications from military moves. But many lenders and landlords don’t know how the rules work, and you may not get the benefits unless you know the steps to take.


Here’s how to take advantage of three key provisions of the law that can help with your personal finances.


Get a 6% Interest-Rate Cap

One of the most powerful provisions of the SCRA is the 6% interest-rate cap for loans taken out prior to military service, including mortgages, credit cards, car loans, student loans, home-equity lines of credit, and business loans. But there is a lot of confusion about what qualifies. The 6% cap only applies to loans you took out before you were on active duty, not debt you incurred while in the service.


Early on in his career, when he was a JAG at Lackland Air Force Base, Texas, Maj. Gen. Steven Lepper, USAF (Ret), president and CEO of the Association of Military Banks of America, helped many new airmen get their interest rates reduced while they were going through basic training.


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“If you had a loan before you came on active duty — say you were a college student and bought a car with an interest rate of 16% and then came on active duty, the SCRA would allow you to have that interest rate reduced to 6%,” said Lepper. “You notify the lender that you are now on active duty, provide a copy of your military orders, and ask for the interest rate to be reduced to 6%.”


Most lenders make the procedure simple. Navy Federal Credit Union, for example, has an SCRA page on its website with details about who is eligible and a link to its SCRA benefits request form.


“You have to give your creditor a notice that you’re going into active service and give them a copy of the military orders, and then it’s self-executing at that point,” said former Capt. Jeremiah Battle, USA, a staff attorney at the National Consumer Law Center.


Reserve members who are called to active duty and members of the National Guard who are under federal orders for more than 30 days are also eligible for the rate reduction.


“Contact the lender, and let them know you’re in the military and about to be activated. If the person you’re speaking with in customer service doesn’t seem familiar with the law, ask for whoever handles their military customers,” said Lt. Col. Steve Lynch, USAF (Ret), now the legal assistance attorney for the 9th Coast Guard district. “Virtually all of the lenders have dedicated personnel to help servicemembers.”


The rate is reduced to 6% while you are on active duty (and an additional year for mortgages), not just delayed.


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“Your actual loan payment is reduced,” said Mark Wernette, chief financial officer for FSNB (originally Fort Sill National Bank) in Lawton, Okla.


If you have a loan but didn’t realize you were eligible for the rate reduction when you first went on active duty, you can still get the benefit retroactively if you contact the lender within 180 days after leaving the military.


“We’ll do a refund for that part and will reduce the loan amount until they’re no longer on active duty,” said Wernette.


Lynch worked with a servicemember who had been paying 27% interest for a pickup truck he bought before he joined the military and didn’t realize he was eligible for the rate reduction until he had been in the service for several years. He still had the loan, and Lynch helped him get the interest reduced to 6%, retroactive to the date he started on active duty. “He got thousands of dollars of interest waived,” said Lynch. 


Terminate a Housing Lease

You can terminate a residential lease if you receive PCS orders or if you receive orders to deploy for 90 days or more.


You can also terminate a lease when you enter active duty. You need to provide a copy of your orders or a letter from a commanding officer stating that the orders will be issued. If you pay rent monthly, the lease will terminate 30 days after the next rent payment is due. Your SCRA right doesn’t need to be stated in the lease.


“This will supersede what the lease says,” said Battle.


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You’re also entitled to a refund of any advance payments. Some landlords are more familiar with these rules than others.


“I’ve handled my fair share of hostile landlords,” when he was an Air Force JAG, said Lepper. “My advice is for the military member to contact the legal assistance office. These are questions the legal assistance office handles routinely. As a JAG, I would contact the landlord and let him or her know what their obligations are under the SCRA. In 99% of the cases, there was no problem.”


Terminate a Car Lease

There are several situations where you can terminate a car lease without an early termination penalty — for example, if you receive orders to deploy for 180 days or longer, or if you are on active duty and stationed within the continental U.S. and receive PCS orders to a location outside the continental U.S.


You can also terminate a car lease you took out before active duty if you are called to active duty for 180 days or longer. You usually need to provide a copy of your orders and return the car within 15 days.


Where to Find Help

The best resource is the legal assistance offiffice on your base (or any nearby base). You can also get help from the American Bar Association’s Military and Veterans Legal Center.


To learn more about these and other SCRA legal protections, see the Department of Justice’s SCRA page and the Consumer Financial Protection Bureau’s military resources.


Kimberly Lankford is a financial expert based in Virginia.


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