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Service Members Civil Relief Act of 20031


The Servicemembers Civil Relief Act of 2003 (SCRA) 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 U.S.C. App. 501 et seq. It was further amended December 10, 2004, by the Veterans Benefits Improvement Act of 2004. The law protects members of the Army, Navy, Air Force, Marine Corps and Coast Guard, including members of the National Guard, as they enter military service (active duty2), as well as commissioned officers of the Public Health Service and the National Oceanic and Atmospheric Administration engaged in active service. Some of the benefits accorded servicemembers by the SCRA also extend to servicemembers’ spouses, dependents, and other persons subject to the obligations of servicemembers. The Housing and Economic Recovery Act of 2008 (HERA) recently amended several sections of this law, extending the time period for certain activities. Major relief provisions of the SCRA include:

Maximum Rate of Interest on Loans, Including Mortgages

Upon receiving a written request for relief and a copy of a servicemember’s military orders, creditors must, for the duration of the servicemember’s military service, reduce the interest3 rate on debts4 incurred by the servicemember, or a servicemember and spouse jointly, before entry into military


This section fully incorporates the interagency examination procedures released as RD Memorandum 2009-015 on April 16, 2009.


In the case of servicemembers who are members of the Army, Navy, Marine Corps, or Coast Guard, active duty is defined as “full-time duty in the active military service of the United States. Such term includes full-time training duty, annual training duty, and attendance, while in the active military service, at a school designated as a service school by law or by the Secretary of the military department concerned. Such term does not include full-time National Guard duty.” 10 USC § 101(d). Note the term “military service” under the SCRA also includes National Guard members under a call of duty authorized by the President or the Secretary of Defense for more than 30 consecutive days and servicemembers who are commissioned officers of the Public Health Service and the National Oceanic and Atmospheric Administration engaged in “active service.” 50 U.S.C. app. 511(2)(B).


“Interest” is defined in the SCRA to include service and renewal charges or any other fees or charges, except for charges for bona fide insurance. 50 U.S.C. app. 527(d).


Section 207 of the SCRA, 50 U.S.C. app. 527, applies to “an obligation or liability . . . incurred by the servicemember, or the servicemember and the servicemember’s spouse jointly, before the service member enters military service.” No distinction is made between personal versus business credit. However, according to a U.S. Department of Education memorandum, the SCRA limitation on interest rates does not apply to federally insured student loans based on 20 U.S.C. § 1078(d), which states that no provision of any federal or state law that limits the interest rate on a loan, will apply to loans made under a government student loan program. Nonetheless, the other provisions of the SCRA, including those providing for a stay of proceedings and reopening default judgments, remain available to servicemembers.

FDIC Compliance Manual — June 2009

V. Lending — SCRA

service to no more than 6 percent per year. (This applies to the individual servicemember’s debt or joint debt with a spouse.)

Creditors must maintain the interest rate reduction for the period of military service, except in the case of a mortgage, trust deed, or other security in the nature of a mortgage, where the interest rate reduction extends for one year after the end of the servicemember’s military service.5

Creditors who reduce the interest rate on the obligations of a servicemember must forgive interest in excess of 6 percent.

The reduced interest rate provision applies unless a court finds the ability of the servicemember to pay interest on the debt at a higher interest rate is not materially affected by his or her military service. In such cases, the court may grant a creditor relief from the interest rate limitations of the Act.

Residential and Motor Vehicle Purchases and Leases

Contracts for the purchase of real or personal property, for which the servicemember has paid a deposit or made a payment before the servicemember enters military service, may not be rescinded or terminated after the servicemember’s entry into military service for a breach of the terms of the contract occurring before or during their military service, or the property repossessed because of the breach without a court order.

Termination of certain residential or motor vehicle leases may be made at the option of the lessee servicemember if the servicemember provides to the lessor or the lessor’s agent written notice of the request for termination along with a copy of the military orders.

Automobiles leased for personal or business use by the servicemember or his dependent may be terminated if the servicemember, after the lease is executed, enters military service for a period of 180 days or more.

Additionally, an automobile lease entered into while the servicemember is on active duty may be terminated if the servicemember receives military orders for a permanent change of station (PCS) outside the continental United States (this would include a PCS to Hawaii or Alaska) or deployment for a period of 180 days or more.


The extension of the interest rate reduction for mortgages for an additional one-year period after the end of military service was added by Section 2203(b) of HERA, which was signed into law on July 30, 2008. Section 2203(a) of HERA extends the stay, adjustment, sale, foreclosure, and seizure provisions from 90 days to 9 months following the end of the servicemember’s period of military service. Unlike Section 2203(b), the amendment described in Section 2203(a) expires on December 31, 2010. On January 1, 2011, the SCRA will revert to the provisions in effect before the date of enactment.


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