Servicemembers Civil Relief Act (SCRA): Who It Impacts, and Why Compliance is Tricky

THe SCRA Limits What Remedies Lenders Can Obtain from Military Borrowers

The SCRA protects servicemembers from foreclosures or seizures of real property for as long as they’re on duty, and for up to one year thereafter. In order to foreclose on a member of the military, a creditor must first obtain a court order or the servicemember’s written agreement. Moreover, a court has the ability to postpone foreclosure, extend the servicemember’s mortgage, and lower their monthly payments.

The same applies to vehicle repossessions, so long as the servicemember put down a deposit or made at least one payment before entering active duty.

The SCRA Allows for Vehicle Lease Terminations

Under the SCRA, a military member can terminate an existing lease they signed on a vehicle if they’re deployed for least 180 days (or their service period is extended to more than 180 days) while the lease is in effect, or if they’re moved outside of the continental US (or anywhere out of their state, if they’re already stationed outside of the continental US).

To end a lease, the individual must present official, written notice to the vehicle dealership with 15 days of the military service order. Lenders can then collect any outstanding payments, but cannot subject the borrower to an early termination fee.

Servicemembers Are Entitled to Lower Rates

As we learned in our recent 2018 Dealer Predictions webinar, lenders are restricted in terms of what interest rates they can impose on members of the military. In addition to the Military Lending Act’s 36% military annual percentage rate cap for consumer loans, the SCRA entitles servicemembers to only pay 6% interest or less on any vehicle loan, credit card, mortgage, or other loan they entered into before enlisting.