It is important to understand the servicemembers civil relief act and how it applies to car loans. Under certain circumstances, active duty service members can break a car lease with military orders.
The Servicemembers Civil Relief Act
The SCRA is a federal law designed to ease financial burdens on members of the military during their service. It provides a variety of protections to service members during and after periods of active duty. Active duty servicemembers can reach out to legal assistance office created to help military members navigate SCRA benefits.
Does SCRA Apply to Car Loans
The SCRA applies to auto loans in two main ways.
- First, there is a six percent interest rate cap. The six percent interest rate cap applies to individuals that enter military service and their spouses. During an active duty service member’s period of service and one year after, the amount of interest to be charged on certain financial obligations incurred prior to military service may not exceed six percent per year.
- Second, according to the Consumer Financial Protection Bureau, service members may terminate an auto lease that the entered into both prior to and during their period of active duty service.
- If signed prior to entering an active duty period of 180 days or longer, the service member may terminate the lease.
- If signed after the service member entered military service, the service member must have received PCS orders (permanent change of station) from a location inside the continental US to outside of the continental US. Alternatively, the service member could be deployed with a military unit or in support of a military operation lasting a minimum of 180 days.
Active Duty Military Service
Active duty refers to full-time members of the US military. These individuals can be deployed at any time. Aside from active duty, there are also reserve members, and members of the National Guard. The National Guard can also be covered by the SCRA, depending on who calls upon them and the length of the deployment.
Penalties for SCRA Violations
Ignorance of auto lending and SCRA laws is no excuse. It’s important for anyone in an industry that deals with service members keep an eye on the laws. Violations — even unintentional — can result in fines and penalties.
Use the SCRACVS to verify SCRA Protections
Landlords, property managers, and motor vehicle lessors may not always know which of their clients are in the military and which are not. Regardless, military members are guaranteed SCRA protections. Therefore, it is imperative to check military status before beginning any legal action against your renter. The Servicemembers Civil Relief Act Centralized Verification service is the best place to verify military status.
Many lenders, banks, landlords, property managers, and motor vehicle lessors use the SCRACVS to check the military status of their renters and customers. It is quick, easy, and cost-effective — we even offer batch discounts for large-volume searches. Results are usually delivered within 24 hours. SCRACVS can also provide live customer support to answer your questions.
Stay safe and avoid fines and penalties for violating the SCRA by using the SCRACVS for all your military verifications.