Ad Disclosure

Guide to the Servicemembers Civil Relief Act (SCRA)

Servicemembers Civil Relief Act

The Servicemembers Civil Relief Act (SCRA) provides certain types of financial assistance to active-duty military personnel so as to not punish them for defending the country during times of conflict.  It was signed into law in 2003, effectively modernizing laws that had been in effect in some way, shape, or form since the Civil War.

Modernization of the statutory protections afforded soldiers was necessary in large part because the nature of military service has changed so much over the years. “Service members’ financial situations are increasingly at risk due to abrupt activations and change of station, especially deployment abroad,” says Edward F. Sherman, a professor at Tulane University Law School and a retired lieutenant colonel in the U.S. Army JAG Corps. “Those who have been activated had their financial lives uprooted.”

You can find an overview of the law’s most important provisions below, followed by a more detailed explanation and the historical background of the law.

SCRA Overview

Basic Rights:

  • Cap on Interest Rates:  Interest for financial obligations that are in existence at the time you’re called into active duty is limited to 6% for the duration of your service, and you will not be responsible for the difference upon completion.
  • Safeguard from Eviction and Foreclosure:  You cannot be evicted from a leased house or apartment due to your inability to pay a predetermined amount of rent during the course of active duty.  Furthermore, a lender cannot foreclose upon your property due to an inability to pay that arises as the result of active duty obligations.
  • Tax Deferral:  You are not responsible for local income taxes when stationed temporarily, and you do not have to pay any taxes (aside from those related to Social Security or Medicare) until you have been out of active duty for 180 days.
  • Delay of Court Proceedings:  You can request that court proceedings be postponed during active duty.
  • Contractual Protection:  Missing installment payments as a result of active duty cannot result in repossession of property without a court order.
  • Insurance Retention:  You cannot lose personal insurance or life insurance as a result of active duty obligations.
  • Lease Termination:  You may cancel a residential or automotive lease signed prior to being called into active duty under certain circumstances.
  • Cell Phone Contracts:  You have the right to suspend or terminate a cell phone agreement if you receive a Permanent Change of Station or are deployed outside of the U.S. for at least 90 days.


  • Active Duty:  The period from the time active duty orders are received until discharge.
  • Dependent:  The servicemember’s spouse, child, anyone for whom the servicemember provided more than 50% financial support in the 180-day period leading up to active duty service.
  • Permanent Change of Station (PCS):  The official relocation of an active duty servicemember.

Detailed Provisions

The Servicemembers Civil Relief Act applies to active duty personnel in the Coast Guard, Air Force, Army, Marine Corps, and Navy; National Guard Members and Reservists in active federal duty; and Commissioned Officers of the Public Health Service and the National Oceanic and Atmospheric Administration.  Dependents of the aforementioned types of military personnel are also eligible for certain benefits.

Finance Charges:

  • Protections:  Should your military service prevent you from meeting obligations related to mortgages, credit card accounts, and non-Federally guaranteed student loans entered into prior to active duty, you have the right to cap the interest on such accounts at 6% for the duration of your service.  The amount of your required monthly payment will be reduced by the respective amount of interest that you are no longer obligated to pay.  This excess interest is permanently settled and will not be owed following the completion of your military duties. 
  • Eligibility:  To be eligible for the 6% interest rate cap you must demonstrate not only that you are on active duty, but also that your active duty significantly inhibits your ability to make payments to your financial obligations as previously agreed.
  • Logistics:  Interest rate relief under the SCRA is contingent upon you submitting a written request to your creditors, along with copies of your orders, within 180 of being released from service.


  • Protections:  You are exempt from eviction from a leased property due to the inability to make monthly rent payments as a result of financial hardship caused by military service.  This provision currently applies to rent payments of up to $2,932.31 per month, though this figure is subject to change based on inflation.  Furthermore, you may legally terminate your lease as a result of being stationed elsewhere for 90 days or more or if you receive Permanent Change of Station (PCS) orders.
  • Eligibility:  In order to benefit from SCRA rent relief, you must have signed your lease before entering active duty and have already received your active duty orders.
  • Logistics:  You must provide written notice to your landlord that you either will be unable to pay rent or wish to terminate your lease.  You must also make the next rent payment due following the provision of written notification to your landlord as well as pay any amounts owed for the 30 days that follow thereafter.


  • Protections:  Mortgage lenders are prohibited from foreclosing upon or repossessing properties secured by a mortgage without a court order during a servicemember’s active duty period as well as the three months following its conclusion.
  • Eligibility:  You are eligible for foreclosure protection if you took out your mortgage prior to beginning active duty and your service prevents you from meeting your obligations as originally agreed upon. 
  • Logistics:  You must provide your mortgage lender with a copy of your active duty orders.


  • Protections:  You cannot be required to pay local income taxes on military pay in the municipality in which you’re stationed on active duty, and this municipality cannot use your military income to increase your spouse’s tax obligations.  This provision only applies to military pay, however, which means alternate forms of income pay may be taxed locally.  You may also be able to defer taxes owed for up to 180 following the completion of active duty, provided you are able to demonstrate that your military service caused your inability to pay.
  • Eligibility:  The provision against double local income taxation applies to all active duty military personnel stationed away from their permanent residence.  To qualify for a deferral of other tax obligations, you must currently be on active duty and be experiencing financial hardships caused by your military obligations.
  • Logistics:  Only file income taxes in your state of permanent residence.

Court Proceedings:

  • Protections:  You have the right to request a “stay of proceedings” for at least 90 days if you are served with a legal complaint to which your active duty military obligations prevent you from responding.  Furthermore, you are entitled to request a “stay of execution” if military obligations prevent you from complying with a court order issued before, during, or within 90 days of the completion of active duty military service.  Finally, if a default judgment is entered against you as a result of your failure to appear in court and your failure to request a stay of proceedings or a stay of execution, you can have the judgment reopened by providing a written request to the court within 90 days of the completion of your service.
  • Eligibility:  In order to qualify for a stay of proceedings or a stay of execution, the court proceeding in question must conflict with your active duty service.  In order to reopen a default judgment, the following conditions must be met:  1) the judgment was entered within 30 days of the completion of your active duty; 2) your military obligations prevented you from responding to the original complaint; and 3) you have a case.
  • Logistics:  You must provide a written request to the court within 90 days of the completion of your service.

Termination of Leases:

  • Protections:
    • Property Leases:  Service members may terminate a lease used to secure property that is designated for dwelling, business, or agricultural use and entered into prior to active duty service upon entering into active duty, receiving orders for a deployment of 90 days or more, or for a PCS.
    • Auto Leases:  Servicemembers may terminate auto loans entered into prior to active duty service after 180 of service or upon receiving PCS orders for a deployment of 180 or more days.  Lenders are also prohibited from charging early termination fees and are required to return prepaid amounts to the borrower.
    • Eligibility:  A servicemember must have entered into the respective lease prior to active duty and must provide written notice of termination to the lessor.
  • Logistics:
    • Property Leases:  Written notice of termination must be provided to the landlord.  The effective termination date for a month-to-month lease falls 30 days after the first payment due date following the provision of written notice.  All other leases are considered terminated on the last day of the month following the month in which written notice was provided.
    • Auto Leases: Written notice of contract termination must be provided to the lender and the vehicle must be returned within 15 days of the provision of this notice.  The date both are in the possession of the lender is considered the contract’s termination date. 

Installment Contracts:

  • Protections:  A party with whom you entered into a contract prior to active duty cannot exercise any right or option to terminate the contract or repossess any real property it is used to secure without a court order while you are on active duty.
  • Eligibility:  You must have both entered into the contract and paid either a deposit or at least one installment prior to the beginning of your active duty.  Active duty obligations must also have a material impact on your ability to fulfill your obligations under the terms of the contract.
  • Logistics:  You must be able to provide a copy of your active duty service orders as well as demonstrate that your service obligations significantly impact your ability to pay.


  • Protections:
    • Life Insurance:  A life insurance policy may not lapse or be terminated due to nonpayment while you are on active duty and for one year thereafter.
    • Health Insurance:  A health insurance policy suspended during active duty will commence upon the completion of service without any disruption not provided for in the terms of the original policy agreement.  This holds true even if a medical condition arose during active duty (provided that military service is not deemed to be its cause).
  • Eligibility: 
    • Life Insurance:  You must have taken out the policy at least 180 days prior to the commencement of active duty, and active duty obligations must have a material impact on your ability to pay.
    • Health Insurance:  The policy must have been in effect prior to the commencement of active duty service.
  • Logistics:
    • Life Insurance:  You must provide a written copy of your active duty orders as well as be able to demonstrate that your service obligations significantly impacted your ability to pay.
    • Health Insurance:  You must apply for reinstatement of coverage within 120 of the conclusion of your active duty.  You must also provide a written copy of your active duty orders as well as be able to demonstrate that your service obligations significantly impacted your ability to pay.

Cell Phone Agreements:

  • Protections:  You have the right to suspend or terminate a cell phone contract if you are deployed outside the continental U.S. for at least 90 days or you receive a PCS.  Service providers are prohibited from assessing penalty fees or requiring contract extensions as a result of the suspension or termination of your original agreement.
  • Eligibility:  You are eligible for this protection if you entered into your cell phone agreement prior to receiving active duty service orders and your service obligations significantly impacted your ability to pay.
  • Logistics:  You must provide written notice of suspension/termination along with a copy of your service orders.

SOL & Waiver of Rights

Statues of limitations are suspended during active duty.  This provision applies both to your ability to initiate legal proceedings as well as the ability for others to initiate legal proceedings against you.

It is possible to waive certain rights provided via the SCRA.  This can only occur as a result of your signing a contract during the course of your active duty that dictates the particular rights to be waived as well as the specific financial instruments to which the waiver applies.  The waiver must be established in a separate contract from that which laid out your original obligations and must be expressed in at least 12-point font.


The Servicemembers Civil Relief Act (SCRA) was signed into law in 2003 by President George W. Bush.  Its purpose is to modernize the Soldiers and Sailors Civil Relief Act (SSCRA) of 1940.  More specifically, the SCRA of 2003 clarified language from the SSCRA of 1940, added additional guidance for compliance, made administrative changes to the layout of the law, and accounted for changes in business practices that arose in the 63-year interim between the passage of the two laws.

The SSCRA of 1940 itself represented a modernization of the Soldiers and Sailors Civil Relief Act of 1918, which instructed courts to take whatever action was deemed necessary to protect the rights of military personnel while in the service of the country.  The original seeds of this legislation can be traced all the way back to the Civil War, when the Union established a complete moratorium on civil actions against federal soldiers and the Confederacy conferred similar protections upon its personnel.

Ask The Experts: Military Finance

CardHub sought the input of experts on the unique financial hurdles facing members of the military, the effectiveness of the SCRA, and what other regulations might be needed in the future. You can check out what they had to say below.

Back to All Experts

Thomas White

Clinical Director of the Veterans Legal Support Center & Clinic at The John Marshall Law School; U.S. Army JAG officer (retired)Why is it necessary to have different personal finance rules for members of the military?

Members of the military not only make up less than 1% of the U.S. population, but they also are subject to a separate set of rules and standards. The U.S. Supreme Court has found that the military is a society within a society, due to the unique mission of the military and the requirement for good order and discipline.

Military personnel, whether Active Duty, Reserve, or National Guard, are subject to immediate recall or deployment with little or no notice. Most military personnel are young, between the ages of 18-24, and for the first time in their lives have a steady income with benefits making them much more economically-attractive than other young people their age. This creates a perfect storm for debt issues. The reasons being the relatively easy access to getting credit and the lack of economic sophistication.

Other factors that would dictate a different set of personal finance rules are similar to those attending college for the first time, except they don’t get a government paycheck like clockwork on the 1st and 15th of every month. Unlike their college-attending counterparts, military personnel are inculcated into a culture that encourages personnel to keep their finances in order as part of good order and discipline. You can’t fight or concentrate on the task at hand if you have collection agencies contacting your spouse back home and your commander telling you to get it fixed or he is going to fix you.”

What are your thoughts on the SCRA – is it effective, what are its most important regulations, and where does it fall short?

First, it is important to understand who receives the protections of the SCRA: Active Duty military, Reservists only when on Active Duty for training or otherwise, and National Guardsmen activated under Title 10 USC or Title 32 in response to a presidential declaration of a national emergency for more than 30 days. The newest version of the SCRA is much more effective, especially since, in my personal experience, the military has made great strides in the preventative law area by educating service members of their ability to avail themselves of the law.

Secondly, the military has been very aggressive in going after SCRA violations, especially over the past 10 years. I suspect this is due to the huge distraction that finances can have on a service member who is deployed and without the availability of the SCRA would have little if any recourse. Important parts of the law that come to mind are the protections against default judgments and the 6% loan cap. Of course the protections available for evictions, residential lease terminations, cell phone contract and other installment type contract issues, along with storage lien protections make the SCRA a much more formidable law than previous versions.

If there is one area that the law falls short is that the SCRA offers no protection to the criminal defendant. It is not that a person accused of a crime should receive unlimited relief, but when the current law was signed we had only been at war a couple of years. Now that we are going on 12+ years of fighting I think now would be a good time to re-look at the potential protections that could be made available for criminal defendants and who are in combat and relied upon by not only their Nation but the service men crouched to the left and right of him in the foxhole.
Back to All Experts

Lt. Col. Dru Brenner-Beck

US Army JAGC (Ret.) Why is it necessary to have different personal finance rules for members of the military?

Congress and the nation have recognized as far back as the Civil War that the demands of military service can make it difficult to fulfill financial obligations incurred before service, and can interfere with a servicemember’s ability to protect their legal rights. As a result, Congress implemented a moratorium on civil actions against servicemembers during the Civil War. In 1918 Congress, rather than implementing a moratorium, instead passed the Soldier and Sailors Civil Relief Act (SSCRA) to provide protections to servicemembers legal rights that were impacted due to their military service, with continued protections provided by subsequent statutory amendments.

In 2013, Congress passed the SCRA (Servicemembers Civil Relief Act) to update many of these protections. The requirements of military service include frequent moves and deployments, often to locations with limited communications abilities, and often include lower pay than the servicemember may have been earning as a civilian. The horror stories when these protections are not respected are horrendous, and have been the focus of enforcement actions by various US Attorney’s Offices nationwide. Without these protections, many of our servicemembers might have significant difficulties remaining in the all-Volunteer force, subject to increasing levels of recall since 9-11.

Unlike a civilian job, military members are not free to decline activation, deployment or a move. Without the legal protections provided by the SCRA, many servicemembers would be placed in a worse position than their civilian counterparts. The SCRA provided protections in those situations where the servicemember’s military service materially affects their ability to protect their rights, rather than providing blanket all-encompassing protections. Nevertheless, courts in interpreting the myriad of individual situations in these cases must interpret the statute to, ‘Protect those who have been obliged to drop their own affairs to take up the burdens of the nation,’ per the Supreme Court case of Boone v. Lightner (1943), and read it ‘with an eye friendly to those who dropped their own affairs to answer their country’s call,’ per another Supreme Court case, Le Maistre v. Leffers (1948). These protections, applicable to servicemembers are intended to provide for, strengthen, and expedite the national defense by allowing servicemembers to devote their entire energy to the defense needs of the nation.

The protections of the SCRA are designed to protect servicemembers when their military service materially affects their ability to pay or protect their own rights. Most (but not all) of the provisions are designed to provide protections for legal obligations incurred prior to entry on active duty. These cases often involve folks who earned more income prior to their military service and therefore are negatively impacted by serving their nation- (you often see this with servicemembers who owned their own businesses prior to their entry into service, and these folks often can lose their businesses and livelihood because of their service–this is one of the situations the SCRA is designed to help with). The protections against eviction and civil suits are likewise designed to protect a servicemember when they cannot be present to defend their legal rights and avoid having their dependents thrown out on the streets, with obvious effects on the servicemember’s readiness.

Unlike civilians, servicemembers do not control where they are ordered to serve, often in locations with limited communications abilities. They are often sent far from home, and often overseas, many times in severely austere conditions. Because of this they, as opposed to civilians, are disadvantaged in defending their legal rights and sometimes in fulfilling their legal obligations. The SCRA strives to even the playing field and provide time for servicemembers to fulfill their legal obligations.”

What are your thoughts on the SCRA – is it effective, what are its most important regulations, and where does it fall short?

The SCRA is only one component in legal protections for servicemembers, although it is an important component. Updated in 2003, the SCRA reflects the national experience resulting from the large call up and volunteering of our citizens after the 9-11 attacks. It provides several key protections.

Most of these provisions are oriented to provide a protection of rights rather than an avoidance of responsibilities, with the requirement for a ‘material effect’ required for most of the provisions, with criminal sanctions for entities that violate the Act. Many of the SCRA’s provisions are designed to help servicemembers responding to the call of their country to mitigate the financial repercussions arising from that response.

You can see by recent Congressional action on enhanced protections against Predatory Lending for servicemembers that Congress is concerned that protections for servicemembers may need to be strengthened. In 2007, Congress passed the Military Lending Act giving the DOD authority to cap the annual interest rate on loans to servicemembers at 36%, which they did by capping interest rates on closed-end loans. But since that time, predatory lenders have altered their products to get around existing state and federal regulations to protect consumers generally and servicemembers specifically, focusing on legal loopholes and open-ended or rotating loans. Congress is currently urging DOD to expand the types of loans subject to the 36% cap. A 2006 DOD report found that, ‘predatory lenders seek out young and financially inexperienced borrowers who have bank accounts and steady jobs, but also have little in savings, [and] flawed credit.’ This is the definition of many of our young servicemembers. Servicemembers serve in all 50 States, and while ‘some states already have their own laws banning high-interest open-end loans, 54 percent of service members are stationed in the 20 states that permit forms of high-cost lending not covered by the DOD rule, according to the Consumer Federation of America (CFA), a consumer advocacy group,’ the report continued.

Additional legal protections against predatory lending aimed at servicemembers would be a positive step, but would not necessarily fall into the scope of the SCRA. Some legislative solutions are outlined in the DOD report.

To what extent has the evolution of modern warfare necessitated changes to servicemember financial regulations over the years? Can we expect additional changes in the near future?

Obviously the up-tempo and repeated continuous deployments of our military since 9-11 has increased the pressures, financial and otherwise, experienced by our soldiers, sailors, airmen and marines (both genders). This is something that has been a concern for commanders and leaders in the military for generations, and will continue to be a focus of their actions in education and prevention.

What are the biggest mistakes that servicemembers make with their money? Is this an indictment of our overall financial literacy, the hardship of military service, or the fact that a large portion of enlisted personnel are young and perhaps may not have attended college?

As discussed above, many/most of our servicemembers are young and financially inexperienced, and predatory lenders are targeting them for their products because they do have a steady salary and bank accounts, although may not have the financial ability to repay these predatory loans. The business model of these predatory lenders is to focus on access to the assets of the borrowers and a continuing income stream, rather than the ability of the borrower to repay the loan. Financial difficulties have been a primary cause of the loss of security clearances for military members, and the effect on military readiness is clear.

Additionally, the increased financial stresses caused by predatory lending can affect the stability of the servicemembers marriages and family situations, creating still more financial problems. Many servicemembers live paycheck to paycheck, as do many Americans, so saving and good financial management is a difficult goal to achieve, but many work hard to achieve these goals. Some, however, servicemembers, particularly young servicemembers with little financial knowledge will make mistakes, often facilitated by predatory lenders who focus on these young servicemembers. The biggest mistake made by these young servicemembers is getting involved with a predatory lender as a way to solve a temporary financial problem. This only worsens the situation.

All the military departments put a great deal of effort into educating servicemembers and their families on financial matters, and the dangers of predatory lending. All have Military Aid Societies that are available to help servicemembers and their families deal with emergencies that come up, and help to get out of the clutches of predatory lenders

The hardship of military service does contribute to financial difficulties experienced by servicemembers; often moves require the loss of a spouse’s job that contributes to household income. The financial literacy of our servicemembers mirrors that of our population in general, and you see these sorts of problems in our population as well. However, the consequences of financial problems for the readiness of our forces are a significant problem not seen in the general population. Financial problems can affect the security clearances of our military personnel, and their ability to focus on their mission, particularly when deployed and their worry over their families may cause distress or distraction. This is a problem that the DOD and the military services take seriously.
Back to All Experts

Capt. Samuel F. Wright

Director of the Reserve Officers Association’s Servicemembers Law Center; US Navy JAGC (Ret.)Why is it necessary to have different personal financial rules for the military? Why can’t the rules that apply to all of us apply equally to those who serve on active duty in the military?

April 1917—The United States entered World War I. Millions of ‘doughboys’ (and a few thousand ‘doughgirls’) entered active military service, by draft, by voluntary enlistment, or by call-up from the nascent Army National Guard, Army Reserve, Naval Reserve, and Marine Corps Reserve. While in boot camp and then on the front lines in France, they could not attend to civilian legal matters back home.

In 1917, John Henry Wigmore was the Dean of the Northwestern University School of Law and already a distinguished legal scholar—the first edition of Wigmore on Evidence was published in 1905. He volunteered to come on active duty as a Major in the Army’s Judge Advocate Department. In a matter of days, he drafted the Soldiers’ and Sailors’ Civil Relief Act (SSCRA), and Congress quickly enacted his handiwork into law.

The original SSCRA applied during the period of national emergency that began when the United States entered World War I and ended in 1919. In 1940, as the United States contemplated the possibility of entering World War II, Congress enacted a new SSCRA that was almost identical to the first one. After World War II, when it became clear that our country would need a large military establishment in peacetime as well as wartime, Congress made the SSCRA permanent.

The SSCRA served our nation well through two world wars, the Korean War, the Vietnam War, and the long Cold War, but by the time of the 1990-91 Persian Gulf War, when Reserve Component (RC) personnel were involuntarily called to active duty in significant numbers for the first time since the Korean War, this law was showing its age and needed updating. Situations that Major Wigmore could not have anticipated in 1917 (like leasing an automobile instead of buying it) necessitated changes in the law.

Through the 1990s, judge advocates of the five armed forces (Army, Navy, Marine Corps, Air Force, and Coast Guard) came up with proposals to improve upon the SSCRA. Finally, in December 2003 Congress enacted their handiwork, and the new law is called the Servicemembers Civil Relief Act (SCRA). The SCRA is codified in the Appendix of Title 50 of the United States Code, at sections 501 through 597b (50 U.S.C. App. 501-597b).

To answer why the rules are different for active duty service members, let us first examine the ways that the rules are different.

Right to a continuance and default judgment protection

I have sued Joe Smith, on behalf of a client, and Joe has not filed an answer or otherwise acknowledged the lawsuit. The 60-day period for Joe to file an answer has come and gone, and no answer has been filed. Now, I can move for a default judgment, for the full amount I sought in my complaint. Normally, I will get such a default judgment. Joe has waived his right to deny liability or to offer a defense, because he failed to file an answer within the limited time permitted by law.

But what if Joe is on active duty and serving in Afghanistan? Joe may be unaware that I have filed this lawsuit. Because of his service to our country, Joe has been unable to retain a lawyer and file an answer.

Before I can get a default judgment against any defendant, military or not, I must first file an affidavit (statement under oath) with the court, stating that the defendant is or is not a member of the armed forces on active duty, and in my affidavit I must set forth the necessary facts to show the basis for my statement. 50 U.S.C. App. 521(b)(1)(A). Filing or using a false affidavit (i.e., claiming that Joe Smith is not on active duty when in fact he is) is a crime punishable by up to a year in jail. 50 U.S.C. 521(c).

I do not believe that Joe Smith is on active duty, but before I aver under oath that he is not, and risk jail time, it certainly behooves me to check. DOD has a free online service to look up if someone is on active duty for the purposes of SCRA.

This website allows you to see if a named individual is/was on active duty at a specific date. This is a free service. All that you need is the individual’s Social Security number, date of birth, and last name.

The DOD also has a free online service for looking up multiple people or multiple dates for one person all at the same time. To use this service you must first create a DOD account (also free). If you plan on using this service several times, it is worthwhile to get an account.

Much of the ‘robo signing’ mess has involved false statements about the military status, or lack of military status, of the delinquent homeowners who are being foreclosed upon. If you sign an affidavit averring that a particular named individual is not a member of the armed forces on active duty, you will be right about 99 percent of the time, but what about the other one percent? Before you (as an attorney) sign or use such an affidavit, you have an affirmative duty to check, and you risk jail time if you claim that the individual is not in the military without having checked. The DOD system is free and easy to use, so use it.

If Joe Smith is on active duty, he is entitled to a continuance of at least 90 days, as a matter of right. 50 U.S.C. App. 521(d). Continuances beyond the initial 90 days are in the discretion of the court. If Joe’s commanding officer (CO) has stated in writing, under oath, that Joe is serving in Afghanistan and (because of military necessity) cannot be granted leave and cannot be permitted to travel to the place of trial, additional continuances should be granted.

This provision was not intended to give and should not be construed to give Joe Smith the opportunity to keep the plaintiff waiting indefinitely, while Joe completes a 20-year active duty career in another 15 years. At some point, within a matter of months rather than years, Joe’s assignment to Afghanistan will be over and military necessity no longer makes it impossible for him to appear and defend in the civil proceeding back home.

Since 1917, the SSCRA has given service members on active duty this protection in civil proceedings in federal court and state court. The enactment of the SCRA in 2003 expanded this principle to make it apply also to federal, state, and local administrative proceedings, as well as judicial proceedings. Major Wigmore could not have anticipated, almost a century ago, the modern administrative state, where important questions are often decided in administrative rather than judicial proceedings.

The world has changed a great deal since 1917, but now more than ever U.S. military personnel are being deployed around the world, and on ships at sea, for months at a time. Administrative and judicial proceedings back home will have to wait a few weeks or months, until the service member has completed the overseas assignment and until military necessity no longer precludes the individual service member from giving his or her side of the story in the proceeding.

Reduction of interest rate to 6% on financial obligations incurred before entry on active duty

Bob Jones has a great civilian job, making $150,000 per year. In the Army Reserve, Bob is an E-4 (junior enlisted). Although Bob makes a lot of money, he spends more. Bob missed some payments on his credit card, and the interest rate has gone up to 29 percent, a punitive rate. Now, Bob has been called to active duty as an E-4, and his income has been diminished by almost 50 percent, so his financial situation has gone from bad to worse.

Under these circumstances, Bob can certainly say in good faith that his entry on active duty has materially (adversely) affected his ability to meet his financial obligations. Under 50 U.S.C. App. 527(a), Bob is entitled to have the interest rate on his pre-service financial obligations (including this credit card balance with the 29 percent punitive interest rate) reduced to 6 percent during Bob’s active duty.

Any payments that Bob makes while on active duty must be applied to principal and interest at the 6 percent rate mandated by the SCRA, not the 29 percent contract rate. The difference is forgiven, not just deferred. It would make good sense for Bob to pay as much as he can during his active duty time, in order to take advantage of the much lower interest rate. If there is a balance remaining when Bob leaves active duty, the interest rate goes back up to the 29 percent contract rate, but only on the remaining balance.

Determination of domicile for voting and taxation purposes Every human being has one and only one domicile, even if it is a legal fiction. For a civilian (a person who is not presently on active duty), the place where the individual usually sleeps is her or her domicile. When Alice Adams, a civilian, moves from Texas (a state with no state income tax) to Hawaii (a state with a high state income tax), she becomes a Hawaiian on the very day that she moves into a new house or apartment in Hawaii. As of that day, she is eligible to vote in Hawaii and no longer eligible to vote in Texas, and she must pay Hawaii state income tax as of the move-in date.

Brenda Barnes joined the Air Force and has been stationed in Hawaii. Of necessity, she must buy a house or rent an apartment in Hawaii—she cannot commute to her Hawaii duty station from the mainland. As an active duty service member, Brenda is exempted, under the SCRA, from the domicile-determination rules that apply to everyone else.

Under 50 U.S.C. App. 571 and 595, Brenda does not lose her Texas domicile or gain a Hawaii domicile by virtue of having bought a house or rented an apartment in Hawaii in order to comply with her military orders. Hawaii is precluded, by the SCRA, from taxing Brenda’s military income or her personal property (like an automobile) unless Brenda becomes a Hawaii domiciliary, and moving to Hawaii to live near her military assignment does not make Brenda a Hawaii domiciliary.

Why is Brenda treated differently from Alice? As a member of the armed forces on active duty, Brenda does not choose where to live—she must go where assigned by the Air Force. Failure to go to appointed place of duty is a crime (unauthorized absence) under the Uniform Code of Military Justice (UCMJ).

Perhaps Alice was transferred from Texas to Hawaii by her civilian employer—but unlike Brenda Alice can quit her job. Brenda cannot quit the Air Force, at least not until the end of her current enlistment or period of obligated service.

Terminating leases of premises and vehicles and cell phone contracts

Under the SSCRA, since 1917, a person entering active duty (whether by draft, by voluntary enlistment, or by voluntary or involuntary call-up from the National Guard or Reserve) has had the right to terminate a lease of premises—an apartment, a house, an office, a farm, etc. With the enactment of the SCRA in 2003, this principle was expanded to include vehicle leases as well. When Major Wigmore drafted the SSCRA in 1917 a brand-new Model T only cost $250, and the idea of leasing a vehicle instead of buying it was never considered. Under 50 U.S.C. App. 535a, as amended in 2010, a person entering active duty has the right to terminate a telephone service contract, including a cell phone contract.

Conrad Cox, a recent college graduate with an excellent job on Wall Street, is entering active duty and reporting to Officer Candidate School (OCS) in January. He is enlisting because he wants to serve our country, and he realizes that he will be making a huge financial sacrifice. He is a bachelor with no children. He no longer needs and cannot afford that luxury apartment in Manhattan where he currently resides. He also does not need and can no longer afford the Mercedes Benz that he is leasing. His cell phone will be nothing but a distraction while he is at OCS. Under the SCRA, he has the right to shuck these things that he no longer needs and cannot afford because he has chosen to serve our country.

I certainly think that these provisions are reasonable and defensible. Yes, this puts a burden on the landlord, the Mercedes Benz dealer, and the cell phone company, but this is a small accommodation to make for those who serve our country in uniform.

Yes, in some important respects the SCRA establishes rules for active duty service members that are different from the rules that apply to civilians (persons who are not currently on active duty). In each of these respects, the differences are reasonable and necessary.

To what extent has the evolution of modern warfare necessitated changes to service member financial regulations over the years? Can we expect additional changes in the future?

Prior to August 2, 1990 (when Iraq invaded and occupied Kuwait and President George H.W. Bush drew ‘a line in the sand’), the Reserve Components (including the National Guard) were considered to be a strategic reserve, available only for a major military confrontation akin to World War III—a contingency that thankfully never came. The transformation from the strategic reserve to the operational reserve (routinely called upon for intermediate military contingencies like Iraq and Afghanistan) began in August 1990 and was greatly expedited by the terrorist attacks of September 11, 2001, the ‘date which will live in infamy’ for our time. Since that fateful day, almost 900,000 National Guard and Reserve personnel have been called to the colors, and more than 330,000 of them have been activated more than once.

U.S. involvement in Iraq is over, and our involvement in Afghanistan will likely wind down next year, as President Obama has promised, but Afghanistan is no more ‘the war to end all wars’ than was World War I.

The SCRA is relevant and necessary, now more than ever, and will likely continue to be not only during our lifetimes but during the lifetimes of our great-grandchildren yet unborn.

What are your thoughts on the SCRA? Is it effective? What are its most effective regulations? Where does it fall short?

As I have explained, the SCRA gives the person entering active duty the right to terminate a lease on premises and a vehicle lease and a cell phone contract. What about other expensive contracts and leases that the person entering active duty no longer needs and in many cases can no longer afford? I would like to see a broader provision that gives the person entering active duty, voluntarily or involuntarily, the right to terminate leases and contracts.

I have heard from a physician who was reentering active duty and giving up his medical practice. He had a long-term lease on an expensive piece of medical equipment—like $400,000 with $350,000 yet to pay in installments. He is giving up his medical practice, and he does not need and cannot afford this piece of equipment. Under current law, he cannot get out from under this lease. He had to declare bankruptcy.

Several very helpful SCRA amendments have already been made in recent years. Now, we need to concentrate on educating both service members and the creditors, landlords, and others that they deal with of the provisions of this important law, which is almost a century old.

What are the biggest mistakes that service members make with their money? Is this more of an indictment of overall financial literacy, the hardships of military service, or the fact that a large portion of enlisted personnel did not attend college?

Like many Americans, service members all too often spend every last cent that comes in and then some, and thus they run into financial difficulties. When they are deployed to places like Afghanistan, they receive (rightfully) substantial additional pay, including hazardous duty pay. They need to learn to save money in the good times to cover the harder times, when they are back in the United States and no longer receiving these extras on their paychecks, or when they leave active duty and may be without work for many months.

The services need to do a much better job teaching financial literacy to officers as well as enlisted personnel, and to those who have college degrees as well as those who have no education beyond high school.

Financial problems in the military can lead to problems in holding security clearances, and thus can adversely affect military readiness as well as the careers of service members. Payday loans are a big problem in the military. In 2007, Congress enacted legislation addressing the problem of payday loans for service members
Back to All Experts

Victor M. Hansen

Associate Dean and Professor of Law at the New England School of Law; Former US Army JAGC Officer Why is it necessary to have different personal finance rules for members of the military?

The history behind the statute is to recognize the servicemembers who frequently deploy and move need special allowances with respect to debt obligations. That is probably less true today than when the statute was first passed.

To what extent has the evolution of modern warfare necessitated changes to servicemember financial regulations over the years? Can we expect additional changes in the near future?

The SCRA was amended fairly extensively in the late 1990’s. I’m not sure modern warfare really has much to do with updates to the SCRA. Modern debt collection practices and various financial tools are likely to be a bigger impetus for change.

What are the biggest mistakes that servicemembers make with their money? Is this an indictment of our overall financial literacy, the hardship of military service, or the fact that a large portion of enlisted personnel are young and perhaps may not have attended college?

I think all of the reasons mentioned are many of the financial problems faced by servicemembers. There is also the reality that service members do not make a lot of money and they can easily find themselves in financial straits.
Back to All Experts

Spencer from Military Money Manual

Self-described “twenty-something officer in the US Air Force” who started to “Share what I’ve learned about personal finance in the military” & “Help others, especially military members, to achieve their financial goals”Why is it necessary to have different personal finance rules for members of the military?

I think you’re referring to the SCRA (Servicemembers Civil Relief Act) or the Military Lending Act. The SCRA, originally passed by Congress after the Civil War, is designed to protect servicemembers from civil matters while at war. The law has since been updated several times, most recently in 2003. Congress has decided that, while serving on active duty, military personnel should be protected from certain financial hardships. I think most Americans agree with that decision.

I think that, as a nation, if we ask our young men and women to sacrifice so much in the military, we must have laws in place to financially protect them and their families. When our men and women of the Armed Forces receive deployment or activation orders, they don’t want to worry about how they’ll pay their rent or high interest credit cards. If we expect our men and women in uniform to be ready to answer the call at a moment’s notice, they must have some financial protections in place so that they can focus on their mission, not their finances.

Military personnel also make attractive targets for scammers and unscrupulous people. They have steady paychecks, aren’t likely to run away, and can’t have too much indebtedness if they want to keep their security clearances.

What are your thoughts on the SCRA – is it effective, what are its most important regulations, and where does it fall short?

The SCRA’s most effective component is the ability to break leases (both property and cars) with 30 days’ notice for 90-day TDYs (temporary duty), deployments, or PCS. Most landlords know about this provision of the SCRA and comply with it. Servicemembers need to remember to give a full 30 days’ notice to avoid paying extra rent.

The law can also prevent homes from being foreclosed on while the servicemember is deployed. In April 2013, the Department of Justice secured a $39 million settlement from 316 servicemembers who were illegally foreclosed on while under the protection of the SCRA. This part of the law seems to be vigorously enforced.

The area where the SCRA falls short is protecting servicemembers from payday loan or cash advance schemes. If you drive near any military base, you’ll see them just outside the gate. The Military Lending Act of 2006 sought to restrict any loan to a servicemember to less than 36% APR. However, payday lenders have found numerous ways around this law and it has not decreased the prevalence of predatory lenders around military bases. If Congress is serious about protecting military personnel from payday loans, they need to strengthen the Military Lending Act or roll it into a stronger SCRA.

To what extent has the evolution of modern warfare necessitated changes to servicemember financial regulations over the years? Can we expect additional changes in the near future?

While warfare has changed remarkably in the past 100 years, financial products and services have moved even faster. With online banking, bill pay, mobile financial apps, and e-commerce, it’s never been easier for deployed or TDY military personnel to keep saving, investing, and not fall behind on their obligations.

In the future, I think we’ll probably see better enforcement of laws already on the books, like the SCRA and Military Lending Act. We’ll probably see more restrictions of the type of loans military members can get. But the payday lenders will probably just find new, creative ways around it. Increasing financial literacy in the military ranks and letting them know that assistance is available for free on base is the best way to help our men and women in uniform.

What are the biggest mistakes that servicemembers make with their money? Is this an indictment of our overall financial literacy, the hardship of military service, or the fact that a large portion of enlisted personnel are young and perhaps may not have attended college?

Servicemembers aren’t any different than the rest of the population when it comes to money. They make the same mistakes (and sometimes do the right things) just as often as civilians. Any mistakes military personnel make are more of a result of personal finance not being taught in schools.

Probably the biggest mistake military personnel make is buying a new vehicle as soon as they graduate basic training or they commission. For many of them, this is their first job with a salaried paycheck. They may have also received a large signing bonus. With money in the bank and a steady paycheck, suddenly a $300/month shiny new car payment looks pretty attractive. But then there’s the 50″ TV to get. And the $800/month rent. And before they know it, their entire paycheck is going to other people and they aren’t saving anything for themselves.

Another huge mistake is not investing in the Thrift Savings Plan (TSP) or Savings Deposit Program (SDP). The TSP offers an amazing opportunity to access low cost, tax advantaged investments that can set the servicemember up for financial independence. The SDP is a special savings account only available to deployed US personal and pays a guaranteed 10% annual interest, unheard of anywhere else in the world. When personnel don’t take advantage of these programs, they are literally missing out on free money.

While a large portion of the enlisted force did not attend college before enlisting, I don’t think that has much to do with their financial struggles. Enlisted personnel are not paid well for the first few years of their service. But they do acquire valuable skills and many do acquire college degrees while they serve. In the Air Force, 65% of enlisted personnel have completed some college courses and 30% have an associate’s degree or higher. When they separate or retire from the military, they also get access to the GI Bill, which can easily pay for a four year degree at the nations top schools.

Most college graduates have no better or a worse understanding of finances than enlisted servicemembers. After all, what’s smarter: getting a job that allows you to travel the world, teaches you real world skills, and can pay for college, when you’re 18 and right out of high school, OR going to a $30,000 a year university, graduating with $100,000+ in student loans and moving back home with the folks because you can’t find a job?

Image:  Sean Locke Photography/Shutterstock

Editorial Disclaimer: Editorial content is not provided or commissioned by financial institutions. Opinions expressed here are the author’s alone and have not been approved or otherwise endorsed by any financial institution, including those that are CardHub advertising partners. Our content is intended for general educational purposes and should not be relied upon as the sole basis for managing your finances. Furthermore, the materials on this website do not constitute legal advice and should not be relied upon as such. Please let us know if you have any questions or suggestions.

Ad Disclosure: Offers originating from paying advertisers are noted as “Sponsored” on the offer's details page. Advertising may impact how and where offers appear on this site (including, for example, the order in which they appear). At CardHub we try to list as many offers as possible but we don't make any representation of listing all available offers.

Previous Financial Literacy at the State Level: Texas   Joe Flacco: Most Valuable (Tax)Payer Next