Wipfli logo
Insights - Articles, Blogs and on-demand webcasts

Articles & E-Books


SCRA benefits: Are expectations changing?

Feb 03, 2023

What is now known as the Servicemembers Civil Relief Act (SCRA) was originally enacted in 1918 as the Soldiers’ and Sailors’ Civil Relief Act (SSCRA). Although the act expired in 1940, Congress reimposed it before World War II.

The SSCRA was updated in 1991 after the Gulf War, but not many changes were made at that time. In December of 2003, President George W. Bush signed into law the updated rule, now known as SCRA.

But throughout its history, the nature and intention of the act has not changed.

What does the SCRA do?

The purpose of SCRA is to provide protection to:

  • Active-duty service members of the Army, Marine Corps, Navy, Air Force, Coast Guard and Army Reserve.
  • National Guard service members mobilized under federal orders for more than 30 consecutive days.
  • Active-duty commissioned officers of the Public Health Service or the National Oceanic and Atmospheric Administration.

The types of protections include:

  • Reducing the interest rate on any preservice loans to a maximum of 6%.
  • Protections against default judgments in civil cases.
  • Protections against foreclosure on their home.
  • Protections against repossession of their property.
  • Termination of residential housing and automobile leases without penalty.

Reviewing SCRA benefits

The protection regarding the reduction of interest rates on preservice loans was recently reviewed by the Consumer Financial Protection Bureau (CFPB).

On December 7, 2022, the CFPB published research data showing that active-duty service members of the Army Reserve and National Guard are paying an extra $9 million in interest every year. This indicates that only a small fraction of those service members are using the rate-reduction benefit. 

Revaluating SCRA verification

The research didn’t provide details on why only a small fraction of active-duty Army Reserve and National Guard service members have obtained the 6% rate reduction. However, the CFPB did speak about the method service members use to provide documentation to financial institutions and whether it could be reevaluated.

Under the current methods, service members have to provide creditors with written notice and a copy of the military orders calling the service member to service — including a certified letter from a commanding officer. Both are due no later than 180 days after the date of the service member’s termination or release from military service.

Instead, the CFPB proposed that financial institutions could use the Defense Manpower Data Center website to verify the military status of a service member.

Periodically searching this website for all borrowers on active duty and automatically applying the rate reduction could be a better option. While no changes requiring this practice have been made to SCRA, it appears to be under consideration.

Given the recent data found by the CFPB and the rise in interest rates and the consumer price index, it may be a good time for financial institutions to review their documentation process. Creating a simplified process to receive the rate reduction could provide service members and their families with financial relief during their time of service.

How Wipfli can help

Wipfli advisors can assist you in reviewing your policies and procedures with respect to SCRA. We are here to provide guidance in identifying areas of weakness and finding solutions. Let us help you as you continue to support our nation’s service members.

Sign up for more financial institution information or keep reading:


Teresa L Rowe, CRCM
Senior Consultant
View Profile