Military Interest Rate Cap Protection

The SCRA requires creditors to limit interest rates on applicable debt to 6% while the service member is on active duty. These protections apply to many types of debt, but the most common include credit card debt, truck or car loans, and mortgages. Debt in the form of a mortgage or deed of trust will be limited for an additional year after active duty has ended.

Another advantage of these protections is that interest in excess of 6% is forgiven. When interest is forgiven, the creditor is required to reduce the service member’s payment amounts by the amount of the interest forgiven. In some cases, this can be a big benefit to service members as it reduces minimum monthly payments on debt.

There are requirements that must be met for the 6% interest rate limit to apply.

• The service member must have incurred the debt prior to entering military service; and

• The service member must provide a creditor written notice and a copy of either his or her military orders or some other “appropriate indicator of military service,” such as a certified letter from a commanding officer. This notice must be given to the creditor no later than 180 days after military service has ended.

Most major creditors, like credit card institutions and national banks, routinely monitor the Defense Manpower Data Center so that they are aware of changes to the military status of their customers. However, the safe approach is for a service member to provide proper notice to each of his or her creditors.

What if my creditor doesn’t comply?

When creditors don’t properly comply with the SCRA, you can take action. Often times, an experienced military justice attorney can have the issue resolved without going to court. Creditors who don’t comply with the SCRA risk paying for your losses and damages resulting from their non-compliance, paying your attorney’s fees, paying fines. Creditors can even being prosecuted for a federal misdemeanor.

If you or someone you know needs help navigating the Servicemembers Civil Relief Act, please contact Military Justice Attorneys today to speak with an experienced military justice lawyer.