Serving in the U.S. military is an important and often dangerous job. To recognize that sacrifice, servicemembers and their families are entitled to important legal and financial protections, especially during active duty.
In 2003, the Servicemembers Civil Relief Act (SCRA) was passed to update and expand protections for servicemembers. The protections under SCRA focus on eliminating the financial stress that comes with enlisting, such as when a servicemember’s income changes after entering active duty or when managing payments becomes difficult due to deployment.
One of the main protections active servicemembers are entitled to is the SCRA interest rate cap of 6% on debts and loans taken out before active duty. Unfortunately, many servicemembers are not aware of these rights and may end up paying more in interest than necessary.
If you are an active or recently active service member, you are legally entitled to a 6% military interest rate cap. If you have not received the Service Member Civil Relief Act interest rate benefit, contact Denbeaux Law to learn how we may be able to help you recover losses.
How Does the SCRA Interest Rate Cap Work?
Under SCRA, lenders are legally required to limit interest rates to 6% per year for active servicemembers on debts incurred before a servicemember begins active duty. This 6 percent interest rate for military members is valid for the entire duration of active service.
The SCRA interest rate cap common consumer loans such as vehicle loans, credit card balances, home equity loans, and student loans. SCRA does apply to mortgage loans and, unlike other loan types, the 6% interest cap on mortgages extends for one year after service.
However, not all debts are eligible for the 6% SCRA interest rate cap. For example, loans that are taken out after active duty begins, or loans that are held solely in a spouse’s name, do not qualify for SCRA interest rate relief.
During your active service, any interest on a qualifying SCRA loan above the 6% limit must be forgiven. Your lender cannot defer or add back the interest after your service ends. If they do, they may be violating your rights under SCRA.
Lender Obligations for the SCRA 6% Interest Rate Cap
To qualify for SCRA interest rate relief, service members must send their lender a written request, including a copy of their military orders, no later than 180 days before their active duty ends.
Once your lender receives your request, they are required to:
- Retroactively reduce the interest rate to 6% from your first day of active service and recalculate your monthly payment based on that lower rate
- Forgive and refund any interest or fees above 6%
- For mortgage loans, continue to apply the SCRA mortgage interest rate limit for one year after active duty ends.
Your lender must forgive any interest or fees above the military 6% interest rate limit on qualifying loans during your active duty service. If your lender defers interest, accelerates your principal payments, or fails to apply the 6% interest rate cap for SCRA, they may be violating your rights, and you may have grounds to sue.
Enforce Your SCRA Rights & Recover What You’re Owed
Even if you didn’t send a written notice to your lender while serving, you still have up to 180 days after your active-duty service ends to request the 6% military interest rate and get a refund of any excess interest and fees.
After 180 days, your lender is not legally required to apply the 6% Servicemembers Civil Relief Act interest rate, but it may not be too late. In some cases, a lawyer can argue that your lender had reason to know you were serving or failed to disclose your SCRA rights.
Contact Denbeaux Law today to schedule a free consultation to learn more about how we may be able to help you enforce your SCRA rights and recover the money you’re owed.
