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Dreher Tomkies LLP
Attorneys at Law
2750 Huntington Center
41 South High Street
Columbus, Ohio 43215
Telephone (614) 628-8000
Fax (614) 628-1600



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CONGRESS AMENDS SOLDIERS' AND SAILORS' CIVIL RELIEF ACT OF 1940

On December 19, 2003, President Bush signed into law the Servicemembers Civil Relief Act (SCRA), which clarifies, restates and strengthens the Soldiers' and Sailors' Civil Relief Act of 1940. Upon entering active duty, the SCRA provides servicemembers with certain protections in order to enable them to devote all of their energy to the defense of the nation. The SCRA is similar to the Soldiers' and Sailors' Civil Relief Act of 1940; however, creditors and servicers should be aware of a number of significant changes, including the following:

  • The 6% interest rate limitation applicable to obligations incurred prior to military service was revised to (i) require creditors to reduce periodic payments by the amount of interest forgiven (note: credit card issuers may be required to lower minimum monthly payments due in order to comply with this requirement), (ii) clarify that interest in excess of 6% is forgiven and not merely deferred and (iii) require servicemembers to notify creditors in order to take advantage of the 6% limitation;
  • Servicemembers that are defendants in civil actions are now granted a minimum 90-day stay of proceedings under certain circumstances;
  • Servicemembers that are defendants in civil actions are now granted a minimum 90-day stay of proceedings under certain circumstances; Creditors and persons engaged in the practice of assembling or evaluating consumer credit information are now prohibited from identifying servicemembers in their records as members of the National Guard or a reserve component solely because they have exercised certain rights under the SCRA;
  • Servicemembers that are defendants in civil actions are now granted a minimum 90-day stay of proceedings under certain circumstances; Lessees may now terminate automobile leases under certain circumstances; and
  • Servicemembers that are defendants in civil actions are now granted a minimum 90-day stay of proceedings under certain circumstances; Holders are prohibited from reaching a servicemember's personal assets during the period of military service in order to satisfy obligations owed by the servicemember's business even if the servicemember is personally liable for the obligation. The rate limitation under the act applies from the date the servicemember is called to military service (active duty). The SCRA went into effect immediately upon passage and applies to any case that was not final prior to the SCRA's enactment. Creditors and their servicers will need to review and revise their policies and procedures, and possibly their computer systems, promptly to address the changes implemented by this act. Other matters addressed by the act include life insurance.

Mike Tomkies and Elizabeth Anstaett