The Servicemembers Civil Relief Act (SCRA) is designed to protect individuals on full-time active military duty who have been materially affected by their service. A recent CompBlog back-to-basics post examines one significant aspect of the SCRA: the 6% interest rate limit.

The SCRA limits interest rates on debts incurred prior to active duty at 6% for the duration of the servicemember’s period of military service. Interest includes service charges, renewal fees, or any other charges (except bona fide insurance) with respect to an obligation or liability.

The limit does not apply to debt incurred during or after active duty service, so it does not apply to new advances under an existing credit card or home equity line of credit program.

This is true even if the open-end plans were established prior to active duty.

In order to receive reduced rates, the servicemember must provide a credit union with a written notice and a copy of the military orders calling the servicemember to active duty, as well as any orders further extending military service, within 180 days of release from military service.

 

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