Servicemembers Civil Relief Act (SCRA) of 2003

1 Servicemembers Civil Relief Act (SCRA) of 2003 BackgroundThe Servicemembers Civil Relief Act (SCRA) of2003 was signed into law on December 19 ,2003 ,amending and replacing the Soldiers and Sailors Civil Relief Act of 1940 ,and is codified at 50 501etseq. It was further amended Decem-ber 10 ,2004 ,by the Veterans Benefits Improve-ment Act of 2004. The law protects members of theArmy ,Navy ,Air Force ,Marine Corps ,and CoastGuard ,including members of the National Guard ,as they enter military service (active duty1) ,as wellas commissioned officers of the Public HealthService and the National Oceanic and AtmosphericAdministration engaged in active service. Some ofthe benefits accorded to Servicemembers by theSCRA also extend to Servicemembers spouses,dependents ,and other persons subject to theobligations of Servicemembers .

2 The Housing andEconomic Recovery Act of 2008 (HERA) recentlyamended several sections of this law ,extendingthe time period for certain activities. Major reliefprovisions of the SCRA include the following:Maximum Rate of Interest on Loans,Including Mortgages Upon receiving a written request for Relief and acopy of the servicemember s military orders,creditors must ,for the duration of the service-member s military service ,reduce the interest2rate on debts3incurred by the servicemember ,ora servicemember and spouse jointly ,prior toentry into military service to no more than6 percent per year. (This applies to the individualservicemember s debt or joint debt with aspouse.) Creditors must maintain the interest rate reduc-tion for the period of military service ,except in thecase of a mortgage ,trust deed ,or other securityin the nature of a mortgage ,where the interestrate reduction extends for one year after the endof the servicemember s military Creditors who reduce the interest rate on theobligations of a servicemember must forgiveinterest in excess of 6 percent.

3 The reduced interest rate provision appliesunless a court finds the ability of the servicemem-ber to pay interest on the debt at a higher interestrate is not materially affected by his or her militaryservice. In such cases ,the court may grant acreditor Relief from the interest rate limitations ofthe and Motor VehiclePurchases and Leases Contracts for the purchase of real or personalproperty ,for which the servicemember has paida deposit or made a payment before theservicemember enters military service ,may notbe rescinded or terminated after the servicemem-ber s entry into military service for a breach of theterms of the contract occurring before or duringtheir military service ,or the property repossessedbecause of the breach without a court order.

4 Termination of certain residential or motor vehicleleases may be made at the option of the lesseeservicemember if the servicemember provides tothe lessor or the lessor s agent written notice ofthe request for termination along with a copy ofthe military orders. Automobiles leased for personal or businessuse by the servicemember or their dependentmay be terminated if the servicemember ,afterthe lease is executed ,enters military service1. In the case of Servicemembers who are members of theArmy ,Navy ,Air Force ,Marine Corps ,or Coast Guard ,active dutyis defined as full-time duty in the active military service of theUnited States. Such term includes full-time training duty ,annualtraining duty ,and attendance ,while in the active military service ,at a school designated as a service school by law or by theSecretary of the military department concerned.

5 Such term doesnot include full-time National Guard duty. 10 USC 101(d). Notethe term military service under the SCRA also includes NationalGuard members under a call of duty authorized by the Presidentor the Secretary of Defense for more than 30 consecutive daysand Servicemembers who are commissioned officers of the PublicHealth Service and the National Oceanic and AtmosphericAdministration engaged in active service. 50 511(2)(B).2. Interest is defined in the SCRA to include service andrenewal charges or any other fees or charges ,except for chargesfor bona fide insurance. 50 app. 527(d).3. Section 207 of the SCRA ,50 app. 527 ,applies to anobligation or by the servicemember ,or theservicemember and the servicemember s spouse jointly ,beforethe servicemember enters military service.

6 No distinction is madebetween personal versus business credit. However ,according toa Department of Education memorandum ,the SCRA limitation on interest rates does not apply to federally insuredstudent loans based on 20 1078(d) ,which states that noprovision of any Federal or state law that limits the interest rate ona loan ,will apply to loans made under a government student loanprogram. Nonetheless ,the other provisions of the SCRA ,including those providing for a stay of proceedings and reopeningdefault judgments ,remain available to The extension of the interest rate reduction for mortgages foran additional one year period after the end of military service wasadded by Section 2203(b) of HERA ,which was signed into law onJuly 30 ,2008.

7 Section 2203(a) of HERA extends the stay ,adjustment ,sale ,foreclosure ,and seizure provisions from 90 daysto 9 months following the end of the servicemember s period ofmilitary service. Unlike Section 2203(b) ,the amendment de-scribed in Section 2203(a) expires on December 31 ,2010. OnJanuary 1 ,2011 ,the SCRA will revert to the provisions in effectbefore the date of Compliance HandbookSCRA 1(11/09)for a period of 180 days or more. Additionally ,an automobile lease entered intowhile the servicemember is on active duty maybe terminated if the servicemember receivesmilitary orders for a permanent change ofstation (PCS) outside of the continental UnitedStates (this would include a PCS to Hawaii orAlaska) or deployment for a period of 180 daysor more.

8 Termination of an automobile lease alsoincludes the return of the automobile to thelessor within 15 days after delivery of thewritten notice of termination. Termination is permitted of pre-service resi-dential ,professional ,agricultural ,or similar leases occupied or intended to be occupiedby a servicemember or a dependent as well asthose leases executed during military servicewhere the servicemember subsequentlyreceives orders for a PCS or a deployment fora period of 90 days or ,Eviction from Bank-OwnedProperty Real or personal property owned by a service-member before the servicemember s militaryservice that secures a mortgage ,trust deed ,orsimilar security interest cannot be sold ,fore-closed upon ,or seized based on a breach ofsuch a secured obligation during the period ofmilitary service or 9 months thereafter without acourt order.

9 Additionally ,in an action filed duringor within 9 months after a servicemember smilitary service ,a court may ,after a hearing on itsown ,or shall ,upon application by a servicemem-ber ,stay a proceeding to enforce an obligationas described above or adjust the debt ,when themember s ability to comply with the obligation ismaterially affected by reason of the member smilitary A landlord may not evict a servicemember or thedependent of a servicemember from premisesthat are occupied or intended to be occupied asa primary residence during a period of militaryservice except by court Insurance Assigned as Security If a life insurance policy on the life of aservicemember is assigned before military ser-vice to secure the payment of an obligation ,theassignee of the policy (except the insurer inconnection with a policy loan)

10 May not exercise,during the period of the servicemember s militaryservice or within one year thereafter ,any right oroption obtained under the assignment ,absentcompliance with a court order or other Action The fact that a servicemember applies for orreceives a stay ,postponement ,or suspension ofhis or her obligations or liabilities pursuant to theSCRA may not in itself provide the basis for thefollowing: A determination by a lender or other personthat the servicemember is unable to pay theobligation or liability in accordance with itsterms; A creditor s denial or revocation of credit,change in terms of an existing credit arrange-ment ,or refusal to grant credit to the service-member in substantially the amount or onsubstantially the terms requested; An adverse report relating to the creditworthi-ness of the servicemember by or to a con-sumer reporting agency; A refusal by an insurer to insure the service-member; An annotation in a servicemember s record bya creditor or a person engaged in the practiceof assembling or evaluating consumer creditinformation identifying the servicemember as amember of the National Guard or a reservecomponent.