What Is the Servicemembers Civil Relief Act?
The Servicemembers Civil Relief Act protects military personnel from various court actions, including evictions and repossessions. It can come into play with issues such as rental agreements, security deposits, prepaid rent, eviction, installment contracts, credit card interest rates, mortgage interest rates, mortgage foreclosure, civil judicial proceedings, domestic relations cases, and income tax payments.
The SCRA covers those who are recently retired from the military as well as those on active duty. It also protects reservists, members of the National Guard called to active duty and sometimes dependents of military members as well (such as in the case of evictions).
The idea behind this law is that servicemembers should be able to perform their duties in the field without having to worry about personal matters at home, such as making car payments.
Because of these protections, plaintiffs who file suit against debtors must deliver a military verification to the court. This is a document that says whether the defendant is a servicemember. The court wants to know if the person is on active duty. If they are not, the case can go forward. But if they are, the correct steps must be taken so the servicemembers’ SCRA rights are not violated.
The 6 Percent Rule
One of the most widely known benefits under the SCRA is the servicemembers’ right to an interest rate of 6 percent. This rate applies to car loans, mortgages, credit card balances and any other type of loan. Servicemembers may be entitled to this special lower rate for up to one year after termination of active duty.
How does the 6 percent interest rule work?
Military personnel are supposed to send letters to lenders requesting a reduction in their interest rate. They should also include a copy of their military orders. If lenders do not comply with the request, they may be found in violation of the SCRA. Violations can cost lenders millions in fines and restitution. And although the law puts the onus on the servicemember to inform the lender of the change, in practice, many lenders are proactive to alert servicemembers of possible benefits under the SCRA.
Lenders should conduct regular searches to determine if any of their customers have gone on active military duty. However, any contracts or agreements servicemembers enter into after being called to active duty are generally not eligible for SCRA protections (but the Military Lending Act may come into play ) See Section 207, SCRA.
Delay of Court and Administrative Proceedings
The SCRA allows active duty servicemembers who can’t appear in court due to their military duties to postpone the case. Servicemembers should make the request in writing, specifying how their military duty affects their ability to appear. They should also tell the court when they will be able to appear. This should be accompanied by a letter from their commanding officer, attesting to the veracity of their statement. If the court denies the delay, it must appoint the servicemember a lawyer. (See Section 202, SCRA)
Termination of Leases
The SCRA allows active duty servicemembers who receive orders for a permanent change of station or a deployment for 90 days or more to break leases without penalty. This rule includes leases for automobiles in cases when the PCS is outside of the continental U.S. or when deployment is for 180 days or more.
Eviction for Nonpayment of Rent
Although the SCRA does not excuse soldiers from paying rent, it may provide some relief. Landlords must get a court order to evict a military member or their dependents. The court will consider whether the servicemember’s military service has materially affected their failure to pay. If it is, the court may stay the eviction when the military member or their dependents request it. The stay is usually three months.
Default Judgment Protection
If the court enters a default judgment against a servicemember during their term of active duty or 60 days thereafter, the SCRA allows the servicemember to reopen it and set it aside. However, the servicemember must show that their service prevented them from showing up in court.
Life Insurance Protection
The SCRA also allows servicemembers to request deferment of certain commercial life insurance premiums and other payments during military service and for two years after. If the Department of Veterans Affairs approves the request, the United States will guarantee the payments, the policy shall continue in effect and the servicemember will have two years after the period of military service to repay all premiums and interest. The SCRA increases the amount of insurance this program will cover to either $250,000 or the maximum limit of the Servicemembers Group Life Insurance.(See Section 401, SCRA)