In 2003, Congress passed the Civilian Relief for Servicemen Act (SCRA or “Act”), i which updated and replaced the Civilian Relief for Soldiers and Sailors Act. The SCRA has been described as “the greatest statutory source of emergency preparedness for US military personnel and their families.” II The aim of the law is to “foresee, strengthen and accelerate national defense” by authorizing the military “to devote all their energy to the defense needs of the Nation. “Iii
The SCRA offers a plethora of protections to active duty members with respect to a variety of obligations ranging from residential mortgages to automotive financing. Since its enactment, Congress has amended the SCRA on several occasions to improve and extend the existing protections of the law. For example, in 2010, Congress passed the Veterans Benefits Act of 2010 (PL 111-275), which amended the SCRA by giving the Department of Justice (DOJ) explicit power to bring actions. civilians against those who break the law. 111-275 also created a private right of action for persons protected under the Act.
While several federal agencies such as the Consumer Financial Protection Bureau (CFPB), the Federal Reserve Board (FRB), and the Office of the Comptroller of the Currency (OCC) participate in monitoring SCRA compliance, the DOJ remains one of the main organizations with application tools. According to recent congressional testimony, over the past four years, DOJ has secured more than $ 50 million from its SCRA enforcement actions.vi In response to the increased volume of foreclosures, federal agencies and congressional policymakers have recently devoted much of their attention to surveillance and law enforcement. the provisions of the SCRA, including those relating to the leasing of motor vehicles and financing of motor vehicles.
In testimony before the Senate Banking Committee last year, CFPB deputy director of membership affairs, Holly Petraeus, expressed the CFPB’s continuing concerns over “installment loans marketed to the military”. Vii Deputy Director Petraeus went on to testify: “I hear from financial advisers about the prevalence of payday type products that are specifically marketed to military families – often with patriotic sounding names and American flags. on the website to correspond, but with an extremely high interest rate for the service member taking the At the same hearing, the Defense Ministry witness noted that “another concern coming from the field is that the Car dealerships, especially used car dealerships and “buy here, pay here” establishments, resort to high interest rate loans. ”Ix
When attempting to pursue remedies under motor vehicle leases or installment contracts with service members, creditors should keep in mind the following SCRA provisions:
- Maximum interest rate on debts contracted before military service (§ 527): The SCRA prohibits creditors from charging active service members an interest rate greater than 6% per annum on debts incurred before their military service. This provision of the law also forgives interest above 6% that would otherwise be incurred. However, a court may grant the obligee an exemption from the interest rate cap provision if, in the opinion of the court, the service member’s ability to pay an interest rate greater than 6% is not. not significantly affected by its service in active servicex.
- Protection under installment purchase or rental contracts (§ 532): Section 532 of the SCRA protects service members who enter into installment contracts before active service and then violate the terms of installment contracts for which they have previously made at least one payment or down payment prior to active service. In the absence of a court order, creditors cannot cancel or terminate these contracts, or repossess property, for breach of conditions.
- Termination of motor vehicle leases (§ 535): Section 535 of the SCRA allows a service member to terminate a motor vehicle rental agreement at any time after entering a period of active duty military service of 180 days or more.xii Such termination also entails end of any obligation on the lease owed by a dependent. terminate a motor vehicle lease, the service member must first provide the lessor with written notice and a copy of the service member’s military ordersxiv The service member must then deliver the motor vehicle to the lessor within 15 days of the delivery of the written notice xv Termination of the Rental of a motor vehicle takes effect on the day the vehicle is returned to the lessor.xvi Although the SCRA prohibits the lessor from imposing an early termination fee on the member of the service, it is still liable for any outstanding taxes, property and registration rights, or other obligations under the terms of rental which are unpaid at the time of terminationxvii
- Application of storage privileges (§ 537): Under SCRA Section 537, a lien holder may not assert a lien (as defined in law) xviii over the property or effects of a service member during the period of his military service active over 90 days without a court order previously entered .xix
Creditors should also be aware that these provisions provide ample ammunition for federal agencies seeking to enforce service member protections. Federal agencies will likely continue to focus on compliance and enforcement of SCRA protections, including protections for auto leases and installment contracts.