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What is the Servicemembers Civil Relief Act (SCRA)?

What is the SCRA?

The Servicemembers Civil Relief Act (SCRA) is a federal law designed to ease financial burdens on military personnel, and their families, while they’re deployed. The SCRA can postpone or suspend financial and/or civil obligations for service members while on active duty and away from home.

When a service member is called to Active Duty, they may take a severe reduction in income or have trouble managing financial affairs while abroad. The SCRA includes protections that allow active military members to reduce their interest rate on pre-existing loans and limits the collection activity that creditors can use while the military member is in Active Duty.

Some benefits of the SCRA:

  • NWCU waives late fees and doesn’t report a service member’s credit during their active duty assignment.
  • The SCRA can reduce a service member’s loan interest to 6% if your rate was previously higher. We can re-amortize the payment with that reduced rate of 6% for the secured loans until your Active Duty status is over.
  • Existing balances on Visa credit cards also receive a reduced rate of 6%.

SCRA benefits apply to loan obligations of the service member as well as any other signers who are also legally responsible for the loan (such as a guarantor) if the loan is taken out prior to the member being called to active duty. For more information on the specific benefits the SCRA provides, visit the SCRA’s website.

Who Qualifies for SCRA Protection?

Active Duty U.S. military members, and their dependents, are eligible to receive financial relief and protections under the SCRA.

The two most common ways in which a person can qualify for the Service Members Civil Relief Act:

  • You must be serving in the National Guard, Army Reserve, or some other type of military reserve and must be called to Active Duty, or a dependent of someone who is.
  • You must be serving in Regular Military (the official armed forces), or a dependent of someone who is.

In either case, if you’re in active service or are a dependent of someone in active service when the loan is taken out, the relief/decrease of that loan will not apply and the original contract interest rate will be maintained.

However, not everyone qualifies for SCRA protections, even though they are in service, for instance:

  • Service members that are in Inactive Duty (such as weekend drill or ROTC training) are not eligible.
  • Debt taken out after the member has joined the military or after the Active Duty assignment has been established is not eligible, although certain loans taken out after the start of active duty may be protected under the Military Lending Act.
  • Civilian employees of U.S. Department of Defense (DOD) or government contractors are not eligible.

What is the Next Step?

In moving forward, here is some information on how and when to notify the credit union that you are on active duty, and make sure you receive the SCRA protections.

To notify the credit union, you can go into your local branch or call (800) 452-9515 to provide NWCU with:

  • the start dates of your deployment
  • provide a copy of the original order (the Request and Authorization for Active Duty Training/Active Duty Tour)

In addition, you may want to have a Power of Attorney (POA) created, naming someone you trust to be able to act on your behalf.

The Act’s protections go into effect immediately when you are activated (on Active Duty). NWCU will apply the benefits retroactively to the initial date your Active Duty service began.

Note: This information should not be considered legal advice. You should contact competent legal counsel with experience in the SCRA if you have any questions or want more information about the protections the SCRA provides.