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SERVICEMEMBERS CIVIL RELIEF ACT (SCRA)

Commentary
Effective Dec. 19, 2003, the Servicemembers Civil Relief Act (SCRA) updated and
replaced the Soldiers and Sailors Civil Relief Act of 1940 (SSCRA).

The historical basis for the original federal law was the protection of those called into or
volunteering for active military service. It was determined that those persons, in exchange
for service in the military forces, should be given special consideration for civilian
obligations incurred BEFORE they were drafted or volunteered to serve their country in an
active military capacity.

The same consideration is given in the event a person is a member of the military reserves
and is called to active duty. The Act protects those obligations taken on PRIOR to that
person being called to, or back to, active duty. Dependents of those covered by the Act
are covered to the same degree.

Any member of the Armed Forces on active duty and any member of a reserve
component (National Guard or Army, Navy, Air Force, Marine or Coast Guard
Reserves) called to active duty is eligible for protection under the SCRA. For members
of the regular Armed Forces, active duty begins the day they leave civilian life. For a
member of a reserve component, there may be several active duty periods during his
or her career, including the initial active duty for training (“boot camp”) and call-ups
for situations such as the wars in Iraq or Afghanistan. Whether or not the service
member volunteered for active duty makes no difference. The sure way to distinguish
a reservist or guard member’s active duty from other periods is to see a copy of the
individual’s orders to begin, or end, active duty. The protections continue until the
service member’s release from active duty.

Of particular interest to financial institutions (and those who provide repossession or
other legal services to financial institutions) are (1) the right to have default judgments and
other legal proceedings, evictions, repossessions and foreclosures delayed until a service
member is able to defend himself or herself in court; and (2) the right to have interest
rates on the service member’s pre-active duty loans reduced to a level of 6% for the period
of active duty.

The following examples further clarify conditions where the Act will or will not apply:

1 Fred Smith purchases a new car. Three months later, Fred enlists in the U.S. Army.
At the moment he is sworn in, Fred, his wife and 16-year-old son are all covered
by the Act. The SCRA requires a court order to repossess a vehicle if the service
member took out the vehicle loan and made a payment before entering military
service.

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