ICBA - Advocacy - Soldier's and Sailor's Civil Relief Act

Soldier's and Sailor's Civil Relief Act

In 1940, Congress enacted legislation designed to offer special protections for individuals called to active military duty. The statute, starting at 50 U.S. Code section 501, is designed to alleviate some of the concerns of civilian life to allow men and women in the military to devote their full attention to the task at hand. Members of the Reserves and National Guard are also covered while they are on active duty.

The protections apply from the date active duty begins and generally terminates three months (90 days) after discharge from active duty.

The last time its provisions were widely used was during the war in the Persian Gulf.

What Does It Cover?

  • mortgage payments
  • credit cards
  • automobile loans
  • civil court proceedings, including foreclosure
  • installment contracts

Maximum Rate of Interest. If a member of the armed services incurred a loan that carried an interest rate higher than six (6) percent before he or she was called to active duty, the maximum rate that may apply to the loan is six percent during the time the individual is on active duty (plus three months).

To obtain the reduced rate, the member of the armed services must apply to his or her lender in writing. Second, the application must include proof of mobilization and placement on active duty status. Third, the applicant must demonstrate that circumstances warrant the reduced rate. This means that the bank must be shown that changed circumstances, such as a reduction in pay, have had a "material effect" and will make it difficult to meet the payments on the loan. For example, a new enlistee in the Army Reserve would be paid $964.80 per month (just over $11,500 annually). However, to streamline and simplify the process, some financial institutions have indicated that a member of the armed services only has to show is a copy of the papers calling him or her to active duty to qualify for the reduced six percent loan rate (the bank should keep a copy of these papers on file).

Mortgage Foreclosure. The statute protects members of the armed forces from actions to enforce contracts, including those secured by a mortgage, that were entered prior to the time the individual entered active duty. To apply, the property must have been owned before the person entered active duty, must still be owned by that individual, and the ability to meet the financial obligation in question (i.e., mortgage payments) must have been materially affected by the active duty obligation. Most often, this will be assumed when there is a reduction in income.

Other provisions apply to rental payments and leases.

Additional information is available from the Department of Defense Web site at www.defenselink.mil/specials/Relief_Act_Revision. More detailed information, including the actual statutory text, can be found at http://usmilitary.about.com/cs/sscra.