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Soldiers' and Sailors' Civil Relief Act of 1940
The Soldiers' and Sailors' Civil Relief Act of 1940
(SSCRA, or the Act) (50 USC 501) is a reenactment of a statute originally
passed in 1918. The intent of the Act is to provide protection for individuals
entering or called to active duty in the military service. The Act is designed
- Enable service members to fight a war without having to
worry about problems that might arise at home, and
- Help service members honor pre-service debts, since
military income tends to be less than pre-service income.
All members of the Army, Navy, Marine Corps, Air Force,
and Coast Guard on active duty and all officers of the Public Health Services
authorized for active duty with either the Army or Navy are covered under the
Act. The Act also covers members of the Army and Air National Guard and U.S.
military reserves called to active duty, as well as commissioned officers of
the National Oceanic and Atmospheric Administration on active duty.
The SSCRA covers such issues as rental agreements,
security deposits, prepaid rent, eviction, installment contracts, credit card
interest rates, mortgage interest rates, mortgage foreclosure, civil judicial
proceedings, and income tax payments. The following summarizes the relief
provisions that might affect financial institutions.
- Interest Rates. Under the SSCRA, service members
can cap the interest rates on all obligations that were entered into before
beginning active duty at 6 percent. Obligations include credit cards,
mortgages, and non-federally guaranteed student loans. In order to invoke the 6
percent cap, military members must write the lender requesting relief and
provide a copy of current military orders. In addition, service members must
demonstrate that active duty materially affects their ability to pay. The cap
is lifted a short time after active duty ends and the rate reverts to the rate
in effect prior to the cap.
- Mortgages. A lender may not foreclose on a
mortgage if the obligation originated prior to entry into active duty and the
service member's ability to pay is materially affected by military
- Installment Loans. A lender may not exercise any
right or option under the contract to terminate an installment contract to
purchase real or personal property or to assume possession of the property for
nonpayment, if the obligation originated prior to entry into active duty and
the service member's ability to pay is materially affected by military
- Leases. A service member may terminate without
penalty a lease for property occupied. The property must have been used for
dwelling, professional, business, or agricultural purposes. The service member
must have entered into the lease before he or she started active duty. To
terminate the lease, the member must provide written notice to the landlord
after called to active duty.
Contrary to what many people believe, there are no
provisions for reemployment rights as part of the SSCRA. Reemployment rights
are contained within separate legislation, The Uniformed Services Employment
and Reemployment Rights Act of 1994 (USERRA).
Additional information on the SSCRA .
The views expressed in this article are those of the author and are not necessarily those of this Reserve Bank or the Federal Reserve System.