What Is the SCRA? The Servicemembers Civil Relief Act Explained

The Servicemembers Civil Relief Act (SCRA) is a federal law that protects active-duty military members from certain civil actions (including foreclosures, vehicle repossessions, evictions, and interest rates above 6%) while they serve. Codified at 50 U.S.C. 3901 et seq., the SCRA is enforced by the Department of Justice, which, along with other federal agencies, has recovered over $400 million for servicemembers since 2011.

If your organization originates loans, manages rental properties, services mortgages, or takes any adverse action that could affect a servicemember, SCRA compliance is a legal obligation, not a recommendation.

History

The SCRA was enacted in 2003, replacing the Soldiers’ and Sailors’ Civil Relief Act of 1940 (SSCRA). The original law was created to ensure that Americans called to military service could focus on national defense without worrying about civil legal proceedings, debt collection, or losing their homes while deployed.

The 2003 update modernized the statute for contemporary financial products and expanded its protections. Congress has amended the SCRA multiple times since, including adding protections for cell phone contract termination and strengthening lease termination rights.

Who the SCRA Protects

The SCRA covers:

• Active-duty members of the Army, Navy, Marine Corps, Air Force, Space Force, and Coast Guard
• National Guard members mobilized under federal orders (Title 10 or Title 32) for more than 30 consecutive days
• Reserve component members when called to active duty
• Commissioned officers of the Public Health Service and the National Oceanic and Atmospheric Administration when in active service
• Dependents: spouses, children, and individuals for whom the servicemember provides more than half of financial support in the 180 days before claiming protections

A critical point for businesses: a borrower, tenant, or customer who was civilian when the relationship began may be called to active duty at any time. National Guard and Reserve members cycle between civilian and military status regularly. SCRA protections activate when military orders are issued, not when the individual notifies the institution.

Core SCRA Protections

Interest Rate Cap (Section 3937)

For debts incurred before entering active-duty service, the interest rate must be reduced to 6% per year for the duration of military service. This applies to:

• Credit card debt
• Auto loans
• Mortgages
• Personal loans
• Student loans (certain types)

The creditor must forgive the excess interest, not defer it. The rate reduction is retroactive to the date of military orders. The servicemember must provide written notice and a copy of military orders to the creditor.

The CFPB found that fewer than 10% of eligible auto loans held by activated Guard and Reserve members actually received the legally required rate reduction, a compliance gap that has driven multiple enforcement actions.

Default Judgment Protections (Section 3931)

Before any court enters a default judgment, the plaintiff must file an affidavit stating whether the defendant is in military service. If the plaintiff cannot determine the defendant’s military status, the affidavit must say so, and the court may require the plaintiff to post a bond.

Filing a deficient military status affidavit is what cost PRG Real Estate $1.59 million, the largest DOJ settlement ever against a property management company. PRG obtained 152 unlawful default judgments through deficient military status affidavits against 127 servicemembers.

Stay of Proceedings (Section 3932)

A servicemember who receives notice of a civil court proceeding and cannot appear due to military duties can request a stay of at least 90 days. The court must grant the stay if military service materially affects the servicemember’s ability to appear.

Eviction Protection (Section 3951)

A landlord cannot evict a servicemember or their dependents from a residence during military service without first obtaining a court order. The court may stay the eviction, adjust the rental obligation, or take other action as justice and equity require. This protection applies when the monthly rent does not exceed a threshold amount that is adjusted annually for inflation.

Protection Against Repossession (Section 3952)

A creditor cannot repossess personal property (including vehicles) owned by a servicemember without a court order, provided the loan or lease was entered before active duty and the servicemember made at least one payment before entering service.

This is the most frequently violated SCRA provision in auto lending. Santander Consumer USA illegally repossessed 1,112 vehicles ($9.35 million settlement). CarMax repossessed 28 vehicles (~$500,000 settlement). Hyundai Capital America repossessed 26 vehicles ($334,000 settlement). Westlake Financial repossessed 70 vehicles ($760,000, plus a follow-up $225,000 settlement for additional violations discovered during DOJ monitoring).

Mortgage Foreclosure Protection (Section 3953)

During military service and for one year after, a mortgage servicer cannot foreclose on a servicemember’s home without a court order, provided the mortgage originated before active duty. Knowingly violating this provision is a criminal offense punishable by fine and up to one year of imprisonment.

JPMorgan Chase paid approximately $31 million to the DOJ and an additional $56 million in a separate private class action for wrongful foreclosures against servicemembers. Some servicemembers received their homes back free and clear.

Lease Termination Rights (Section 3955)

Servicemembers who receive permanent change-of-station orders, deployment orders of 90 days or more, or orders to enter military service can terminate residential and vehicle leases without early termination penalties. For residential leases, the termination takes effect 30 days after the next rent payment is due. For vehicle leases, termination takes effect on the date of delivery of written notice.

Greystar, the nation’s largest property manager, paid $1.4 million because its software automatically charged early termination fees to servicemembers who lawfully terminated leases under this provision.

Cell Phone Contract Termination (Section 3956)

Servicemembers who receive military orders to relocate for at least 90 days to a location that does not support the contract can terminate cell phone and similar service contracts without early termination fees.

What Businesses Must Do

The SCRA does not just create rights for servicemembers. It creates obligations for the businesses that interact with them. Based on DOJ enforcement actions and consent decree requirements, compliant organizations must:

Verify military status before adverse actions. Check the Defense Manpower Data Center (DMDC) database before any eviction, repossession, foreclosure, or default proceeding. Every recent consent decree mandates this.

Apply rate caps when notified. When a servicemember provides military orders and requests the 6% rate cap, apply the reduction retroactively to the date of the orders, forgive the excess interest, and adjust the account accordingly.

Train staff. Every consent decree requires mandatory SCRA training for all personnel who interact with servicemember accounts. If your leasing agents, loan officers, or collections staff do not know the SCRA exists, violations are inevitable.

Maintain documentation. Every verification, every decision, every action affecting a servicemember account should be documented and retrievable. The DOJ expects audit-ready records.

Monitor continuously. A borrower or tenant who was civilian at origination may activate at any time. Single point-in-time checks are not sufficient. The DOJ expects ongoing monitoring for military status changes.

SCRA Penalties

Civil penalties per SCRA violation are $79,380 for a first offense and $158,761 for subsequent offenses, per the July 2025 inflation adjustment under the Federal Civil Penalties Inflation Adjustment Act. These are per-violation amounts, on top of restitution to affected servicemembers, credit repair obligations, legal costs, and the operational burden of a multi-year consent decree. For a full breakdown of recent enforcement trends, see our analysis.

Federal agencies have recovered over $400 million for servicemembers through SCRA enforcement since 2011. Enforcement has been sustained across both parties, with cases spanning four consecutive administrations.

SCRA vs. MLA

The SCRA is often confused with the Military Lending Act (MLA). They are separate laws with different requirements:

• The SCRA protects servicemembers from adverse actions on obligations incurred before active duty: rate caps, foreclosure protection, repossession protection, lease termination rights.
• The MLA regulates new credit extended to active-duty servicemembers and dependents, capping the Military Annual Percentage Rate at 36%, prohibiting mandatory arbitration, and restricting certain loan features.

Both laws apply simultaneously. A lender that complies with the MLA on new loans may still violate the SCRA on pre-service obligations.

How to Verify Military Status

The Department of Defense maintains the Defense Manpower Data Center (DMDC), which provides military status verification. Organizations can verify whether an individual is currently on active duty by querying the DMDC database.

However, a single DMDC check at one point in time is not adequate for ongoing compliance. Reservists and National Guard members cycle between civilian and active-duty status. The DOJ expects organizations to verify military status before every adverse action and to monitor portfolios for status changes on an ongoing basis.

The Bottom Line

The SCRA is not an obscure statute. It is actively enforced by the DOJ, which has dedicated enforcement resources through the Servicemembers and Veterans Initiative and the SCRA Enforcement Support Pilot Program. State attorneys general are pursuing independent enforcement actions. Servicemember complaints hit 84,600 in 2023, up 98% from 2021.

For lenders, property managers, and financial institutions, SCRA compliance requires automated military status verification, systematic procedures for every SCRA protection, staff training, and documented audit trails. Manual processes and institutional knowledge are not adequate. Every major SCRA enforcement action in the past decade involved organizations that believed they were compliant. A risk assessment is the fastest way to find out whether your current processes actually hold up.

For a comprehensive walkthrough of building a compliance program, see our complete SCRA compliance guide.

civrel.io automates SCRA compliance end-to-end: military status verification via DMDC, proactive monitoring for status changes, automated rate cap calculations, audit-ready documentation, and the reporting infrastructure that consent decrees require.

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$400 million+ in SCRA settlements and penalties. Every one started with a process gap that could have been caught. How confident are you in yours?

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