Complying with SCRA Credit Card Regulations

Active duty service members serving in the United States military are well-protected by the Servicemembers Civil Relief Act (SCRA). Some protections extend after the servicemember has left active duty.

Under the SCRA, servicemembers can receive financial relief and protections. If you are an active-duty servicemember or the immediate family member of someone in military service, you may be familiar with the SCRA and its provisions.

However, if you are new to information on the SCRA, you may need some more background information about certain protections.

This article will discuss the background, benefits, and compliance with SCRA legalities.

What Is The Servicemembers Civil Relief Act (SCRA)?

The Servicemembers Civil Relief Act “SCRA” was enacted by the United States Department of Justice in 2003. It replaced the earlier Soldiers’ and Sailors’ Acts and followed the Civil Rights Act.

The Civil Rights Act is important because its main objective is “to uphold the civil and constitutional rights of all Americans”—especially the most vulnerable members of American civil society. The Civil Rights Division enforces the Servicemembers Civil Relief Act.

How Was The SCRA Legalized?

The United States government has a long history of providing benefits to citizens willing to sacrifice their lives for their country.

The Servicemembers Civil Relief Act was enacted in 2003 but has not remained stagnant since then. It has been amended several (almost a dozen) times to keep up with the changing times and the needs of active duty service members.

In fact, the SCRA is the expansion of the Soldiers’ and Sailors’ Civil Relief Act of 1940 (“SSCRA”); this original law was written to ease the financial obligations and burdens of service members while participating in military service.

During the Civil War, the United States Congress first passed a law or memorandum that allowed the delay of any proceedings, whether in civil or criminal courts, for US citizens who fought for the country. Later, during the period of the world wars, the SCRA was written and passed because the US government was looking to protect soldiers who were fighting overseas. This was beneficial because the SCRA offered more specific legal protections and resolutions to civil or criminal disputes involving US military members serving locally or abroad.

Since then, the US Congress has approved the SCRA to make it more inclusive to more service members. This change is believed to have been due to the participation of the National Guard in responding to the terrorist attack of Sept. 11, 2001. Either way, changes to the SCRA provided more legal protections and eased financial burdens on the military members of the United States.

Does The SCRA Offer Any Benefits and Protections?

Yes, and the SCRA has been amended many times to help with financial strains during US recessions and economic crises that affect active service members.

The SCRA was very helpful during March 2020 when the United States government’s Department of Defense ordered a temporary ban on domestic travel for everyone, including military members and their families. This travel ban was implemented to address the COVID-19 pandemic and curb the rise of infections.

To assist the affected service members, Congress amended the SCRA so that servicemembers can end a housing or automobile lease agreement without prior notice. Another amendment allowed families of servicemembers who die or are seriously injured to end their ongoing phone, cable, and/or internet contracts without notice.

Generally, the SCRA as a federal law covers several issues regarding financial protections, including, but not limited to, the following:

• rental agreements and contracts
• security deposits
• paying rent
• eviction regulations
• installment payments
• credit card interest rates
• mortgage interest rates and foreclosures
• civil judicial proceedings
• automobile leases
• life insurance
• health insurance
• income tax payments

Over the years, the SCRA has been amended to enhance its protections for active duty service members. Some recent updates include the ability of service members and their spouses to have their professional licenses recognized when they relocate to another state due to military orders. In addition, the contract termination protection now covers gym memberships, fitness programs, and home security services. Active duty members and their spouses can now elect a domicile for tax purposes.

Since the SCRA is a federal law meant to protect active duty service members, the Attorney General is authorized by law to file federal lawsuits against persons or entities that violate the SCRA. In lawsuits, the Attorney General can seek monetary damages, civil penalties, and equitable or declaratory relief on behalf of the servicemembers involved in the case.

Servicemembers can seek legal assistance from the local military office, but in some instances, the Department of Justice can review the violation and recommend the appropriate actions.

Who Can Benefit From These SCRA Benefits?

The Servicemembers Civil Relief Act outlines the definition of military service. It includes:

1. Any full-time, active duty members of the six military branches, namely the Army, Navy, Air Force, Marine Corps, Coast Guard, and Space Force
2. Reservists on federal active duty
3. Members of the National Guard on federal orders for a period that is longer than 30 days

In addition, SCRA also covers some personnel under the:

1. Public Health Service (PHS)
2. National Oceanic and Atmospheric Administration (NOAA)
3. U.S. Department of State

SCRA protections usually begin when servicemembers enter active duty military service or receive military orders (for reservists).

The SCRA also offers benefits to service members who are absent from military duty due to a lawful cause, illness, wounds, or leave, so they are essentially protected and eligible for the SCRA benefits even if they are not in a period of active duty service.

Apart from the actual service members, the SCRA will provide benefits and protections to their dependents, including individuals who co-signed a loan or took out a loan with the service member. Dependents can be the spouse, child/children, or any person the servicemember has financially supported for the past 180 days.

The SCRA benefits are numerous because they apply not only to servicemembers constantly on active duty service but also to those on the list as reservists and their dependents, who are equally affected by their military service activities, risks, and relocations.

What Are The Specific Benefits and Protections Under SCRA?

The SCRA provides many legal protections. Here is a general overview of some protections you may receive if you are eligible under the SCRA.

• 6% cap on interest rates incurred from financial obligations (before military service)
• ability to stay civil court proceedings
• protections in connection with default legal judgments
• protections in connection with residential lease terminations
• protections in connection with evictions, mortgage foreclosures, and installment contracts (including car loans)

Some benefits are more sought after than others, and we will list below some protections ranging from mortgages to life insurance.

Postponing Foreclosures

The sale, foreclosure, or seizure of property due to nonpayment of mortgage debt before military service will be valid if made during or within nine months after the service member’s active duty – unless it is to carry out a valid court order.

Deferring Income Taxes with The IRS

The Internal Revenue Service, the IRS, and local state taxing authorities will defer the service member’s income taxes before or during periods of active duty if the service member’s ability to pay is materially affected by the military service. This deferral does not allow the addition of interest or penalties.

Prevention of Evictions

The servicemember and their dependents or families cannot be evicted without a court order, regardless of their rental agreement or local state laws. But this only applies to residences wherein the monthly rate is a certain amount.

Protection From Default Judgments

Servicemembers on active duty can be represented by a lawyer (appointed by the judge) if a civil action, civil proceeding, or administrative proceeding is filed against them.

Postponing Civil Court Proceedings

Servicemembers can request a 90-day delay for civil court action if they cannot attend due to active military service. These civil court cases include, but are not limited to, divorce, child support, and foreclosure proceedings. (The delay does not apply to criminal court or administrative proceedings.)

Protection of Businesses

Service members who own a small business with non-business assets, military pay, or business debts are relieved of financial obligation from the creditor if they are on active duty.

Termination of Lease Agreements

A written notice of termination may be submitted to terminate a residential, agricultural, professional, or business lease if it was entered before starting military service, upon receiving a permanent change of station order, or upon receiving orders to deploy (with a unit or individually) to support a military operation that exceeds 90 days.

Termination of Phone Services

Terminating cellphone or phone exchange services is allowed if the contract was entered before receiving active military orders to relocate for over 90 days to a new location which is not supported within the phone contract.

Protection From Property Repossessions

Property repossession is prohibited without a court order, whether due to nonpayment or contract termination for payment gaps before or during a period of active duty.

Professional Liability Insurance

Service members who work as professionals in other fields, such as healthcare or legal services, can suspend their professional liability insurance contract by writing a request to their insurance carrier. Once the insurance is suspended, premium payments do not have to be paid, and the carrier should refund any premium payments made while on active military service. However, service members can reinstate their suspended insurance by writing a request within 30 days of returning from active military service.

Protection with Life Insurance Coverage

Military personnel on active duty are protected against terminations of required premium payments from life insurance companies. However, the increase in premium payments based on age in individual term insurance is not within the SCRA regulations. Insurance carriers may also restrict the coverage provided for certain activities required by military service.

Voting Rights

Similar to the tax residency benefit, the residency for voting purposes for state, federal, or local voting rights will be protected despite a service member’s absence due to periods of active duty. Protections may also apply to a service member’s spouse.

While these benefits are government-mandated, some private companies offer additional benefits to service members and their dependents. For example, some credit card companies provide exclusive cash refunds to service members.

What Are Some SCRA Benefits For Active Duty Service Credit Card Holders?

Credit card holders have a couple of benefits since the SCRA limits the interest rate charged on some financial contracts to no more than 6% per year. These contracts can be for credit cards and mortgages. With the SCRA, the interest rate will be capped at 6% per year.

To obtain this, the servicemember should provide their creditor with a written notice and a copy of their military orders. This copy can be any appropriate indicator of their military service. An official letter from their commanding office will suffice. The paperwork, including the written notice and proof of military service, should be handed to the creditor no later than 180 days from the end of the service member’s period of active duty.

Creditors are then required by law to forgive and not defer interest greater than 6% per annum retroactively. They cannot accelerate the principal payment in response to the service member’s request for the 6% cap.

Moreover, select credit card companies offer additional benefits to active duty service member, including USAA, American Express, Bank of America, Barclaycard, BBCA, Capital One, Chase, Citi, Discover, Synchrony Bank, US Bank, Wells Fargo, and Victoria’s Secret.

Can You Waive Your Rights Under The SCRA?

Interestingly enough, the SCRA allows servicemembers to waive their rights. A written agreement or waiver is valid if it is signed during or after the period of military service. Signing the waiver for SCRA rights before entering a period of military service will make it invalid. The format of the waiver is important. Generally, the waiver cannot be a clause in an agreement but has to be a stand-alone document.

Of course, before the waiver is signed, all documents and provisions should be carefully read and understood by a knowledgeable legal officer or qualified attorney.

The Bottom Line

It is beneficial to know the different protections you can have under the SCRA benefits, which can greatly help with financial responsibilities by providing education and private student loans, home equity loans, vehicle loans, any ongoing periodic payments, interest rate reduction, existing credit, and credit card debt, among many other things.

If you are a servicemember or dependent of one and believe that your SCRA rights have been violated, you may first seek assistance from a local US Armed Forces legal assistance program.

FAQs

Are credit cards covered under SCRA?

Yes, credit cards, as well as other loans, are covered by the SCRA.

What is the interest rate cap for SCRA credit cards?

The interest rate cap for credit cards under SCRA is 6% per annum.