For Service Members
If you are an active duty service member, thank you for serving.
You should know that you may be targeted by criminals or those who don’t conduct business aboveboard.
You're a prime target for several reasons. You spend extended periods of time away from home, including training, tours, and deployments. You receive a steady government paycheck. And you may fear that a financial or civil problem could affect your security clearance or military career.
That's why there are certain federal and state laws that help protect you. This page doesn't cover all federal and state laws and protections that may help safeguard your finances, but it should help inform you of your general rights, protections, and benefits available to active duty service members.
Servicemembers Civil Relief Act (SCRA)
The Servicemembers Civil Relief Act (SCRA) is a federal law that provides protections to individuals in military service, including active duty service members, Reservists and members of the National Guard while on active duty. If you are covered by the SCRA, the law may also afford certain protections to your dependents, including your spouse, your children, and any individual for whom you provided more than one-half of his or her financial support for the past 180 days.
The National Guard Relief Act is a federal law that mirrors the SCRA, protecting active National Guard members.
The purpose of these laws is to postpone, suspend, terminate, or reduce the amount of certain civil obligations so that members of the armed forces can focus their full attention on their military or professional responsibilities without adverse consequences for themselves or their families.
Who Does the SCRA Cover?
- Active duty service members
- Reservists while on active duty
- National Guard members while on active duty
What Does the SCRA Cover?
- Automobile Leases: This benefit allows termination of automobile leases leased for personal or business use by service members and their dependents if the service member subsequently receives orders for a permanent change of station (PCS) outside the continental United States or from Alaska or Hawaii to the continental United States or a deployment for a period of 180 days or more. Lease amounts that are unpaid for the period preceding the termination date are paid on a prorated basis. The lessor may not impose an early termination charge.
- Default Judgment Protection: If a default judgment is entered against a service member during his or her active duty service or within 60 days thereafter, the SCRA allows the service member to reopen that default judgment and set it aside if certain conditions are met.
- Delay of Court and Administrative Proceedings: The SCRA permits active duty service members who are unable to appear in a court or administrative proceeding due to their military duties to postpone the proceeding for a mandatory minimum of ninety days upon the Soldier's request. This provision specifically includes child custody hearings.
- Enforcement of Storage Liens: A service member with property or effects subject to a lien, including liens for storage, repair or cleaning of property, is protected from foreclosure or enforcement of the lien during the period of military service plus three months unless a court finds that the service member's ability to meet the obligation is not materially affected by military service.
- Eviction for Nonpayment of Rent: Although the SCRA does not excuse service members from paying rent, it does afford some relief if military service makes payment difficult. Military members and their dependents (in their own right) have some protection from eviction under the Servicemembers Civil Relief Act (SCRA).
- Foreclosures: The SCRA requires a court order before the foreclosure of a mortgage entered into prior to active duty. This protection extends for a period of nine months from release from active duty.
- Health Insurance Reinstatement: The SCRA provides for the reinstatement of any health insurance upon termination or release from service if the insurance was in effect before such service commenced and terminated during the period of military service.
- Life Insurance Protection: The SCRA permits the service member to request deferment of certain commercial life insurance premiums and other payments for the period of military service and two years thereafter.
- Seizure of Property: The SCRA requires a court order before a creditor can seize property secured by a purchase contract (specifically including automobiles) entered into prior to active duty.
- Six Percent Rule: A service member has the ability to reduce consumer debt and mortgage interest rates to 6% under certain circumstances. This applies only to debts and mortgages that were entered into prior to entry on active duty. In the case of mortgages, this reduction in interest extends for one year from release from active duty.
- State Taxation Clarification: The SCRA provides that a nonresident service member's military income and personal property are not subject to state taxation if the service member is present in the state only due to military orders. The state is also prohibited from using the military pay of these nonresident service members to increase the state income tax of the spouse. New provisions to the SCRA (called the Military Spouses Residency Relief Act) have been added that may extend similar tax protections to some military spouses. The extension of this protection is contingent upon meeting certain qualifying factors.
- Telephone Service Contracts: This benefit allows termination of a telephone contract (this includes cellular telephone services) at any time after the date a service member receives military orders to relocate or deploy for a period of 90 days or more to a location that does not support the contract. A dependent may terminate a contract if the service member is a beneficiary of the contract and could terminate it, if the contract were the service members.
- Termination of Leases: This benefit allows termination of leases by active duty service members who subsequently receive orders for a permanent change of station (PCS) or a deployment for a period of 90 days or more. Rent amounts that are unpaid for a period preceding the date of lease termination are paid on a prorated basis. The lessor may not impose an early termination charge.
For more information about the SCRA, go to: www.servicemembers.gov. For commonly-asked questions and answers, go to the U.S. Department of Justice publication, available in .pdf, called, "Servicemembers Civil Relief Act (SCRA) Questions and Answers for Servicemembers."
Military Lending Act
The federal Military Lending Act (MLA) provides several rights and protections to active duty service members (including those on active Guard or active Reserve duty) and their dependents in certain types of consumer credit transactions.
Sometimes, predatory lenders target service members and their family members. Predatory lending occurs is when creditors give loans designed to keep debtors in a cycle of debt, including high interest rates and hidden fees or penalties. The MLA protects service members from predatory loans.
Under the MLA:
- Lenders cannot charge more than an annual percentage rate (APR) of 36% for interest rates and most fees. With some exceptions, this includes finance charges, credit insurance premiums or fees, add-on products sold in connection with the credit, and other fees like application or participation fees. (NOTE: Credit card companies don’t have to comply with the MLA until October 3, 2017.)
- Lenders are prohibited from including mandatory arbitration clauses or waivers of legal rights as part of the loan terms. Lenders can’t require service members to give up certain rights they have under state or federal laws like the Servicemembers Civil Relief Act.
- No mandatory allotments. (Military allotments allow a lender to automatically collect a payment directly from a service member’s pay.) Lenders are prohibited from securing the loan by requiring a “voluntary” military allotment, obtaining access to a bank account, or by holding a check or car title.
- No prepayment penalty. Lenders cannot charge a penalty if a service member pays back part – or all – of the loan early.
- Clear fine print. Lenders must provide a clear description of payment obligations and other disclosures.
The federal Consumer Financial Protection Bureau (CFPB) enforces the Military Lending Act among other federal consumer financial laws.
If you are an active duty service member, you can also contact your local Judge Advocate General’s (JAG) office to learn more about lending restrictions. You can use the JAG Legal Assistance Office locator to find help. You can also ask your installation financial readiness office for information or go to www.MilitaryOneSource.mil.
Credit Report Active Duty Alerts
Active duty service members who deploy can place an active duty alert on their credit report to protect themselves from fraud and help minimize the threat of identity theft. Active duty alerts require businesses to take extra steps before granting credit in the name of the person who requested the active duty alert. Active duty alerts last for one year, but can be renewed.
In addition to the extra steps businesses must take before granting credit during an active duty alert, the person who requests one will be removed from the marketing lists of the credit bureaus for pre-screened credit card offers for two years (unless the consumer requests otherwise).
To place an active duty alert on your credit report contact any of the three major credit bureaus:
The Uniform Services Employment and Reemployment Rights Act ("USERRA") is a federal law that ensures that those who serve or have served in the Armed Forces, Reserve, National Guard, or other uniformed services: (1) are not disadvantaged in their civilian careers because of their service; (2) are promptly reemployed in their civilian jobs upon their return from duty; and (3) are not discriminated against in employment based on past, present, or future military service. The law is intended to encourage non-career uniformed service so the United States can enjoy the protection of those Services, staffed by qualified people, while maintaining a balance with the needs of private and public employers who also depend on these same individuals.
For more information about USERRA, go to: www.dol.gov/vets/programs/userra/userra_fs.htm.
Establishing Power of Attorney While Deployed
Establishing power of attorney means appointing a trusted friend or family member as an “agent” or “attorney-in-fact”. The attorney-in-fact is allowed to make financial decisions on your behalf, including making purchases in your name and withdrawing funds from your bank account. Many service members establish power of attorney before being deployed. To establish power of attorney, draft a document stating the name of the attorney-in-fact as well as their powers and responsibilities with your notarized signature. To revoke power of attorney, send a written notice that the power of attorney has been revoked to your attorney-in-fact as well as any business or person that has received a copy of the document, and request that all copies of the original document be returned to you. If you have any questions about power of attorney or how to establish it, contact your JAG officer or a private attorney.
Residential Rental Scams
Some scammers target service members and their families because they relocate frequently. For example, scammers may advertise a great deal for an apartment or other rental property, pressuring active service members to pay a security deposit before having the chance to view the property. In reality, the property is either very different from the advertisement, or may not exist at all. The scammer, having collected the security deposit, is nowhere to be found.
There are steps you can take to protect yourself from these scammers. If at all possible, meet with your prospective landlord and view the property before putting down a deposit. If you are unable to do this, make sure the landlord works for a real, reputable real estate company. Look online for reviews from other tenants, and search for the company using the Better Business Bureau’s “Find a Business” search (www.bbb.org). You can also contact your duty station to learn about housing resources near your base.
If you are an active duty service member who is a resident of Iowa and you need assistance with a consumer issue, file a complaint or contact our contact our Consumer Protection Division. Be sure to inform us that you're an active duty service member.