SCRA Interest Rate Cap

What the SCRA actually requires

Section 207 of the Servicemembers Civil Relief Act (SCRA), codified at 50 U.S.C. § 3937, caps the interest rate on consumer obligations entered into before the service member began active duty at 6% per yearduring the period of military service.

Critically, § 3937(a)(2) requires that any interest above the 6% cap be forgiven — not deferred. The lender cannot simply pause your high rate and restart it after you're done; they must permanently waive the excess. That language is what makes SCRA a true financial benefit, not just a temporary breather.

The cap applies retroactively to the start date of military service, even if you notify the lender months later. Once they receive your written notice and a copy of your orders, they must reapply the cap from the original service-entry date and refund any excess interest already paid during that window. There is a deadline: under § 3937(b)(1) the notice may be given at any time during service and up to 180 days after release or termination of military service. (A lender may also verify your service independently through the DMDC database and apply the cap without any notice from you.)

Who qualifies

The SCRA covers, among others:

• All members of the regular components on active duty (Army, Marine Corps, Navy, Air Force, Space Force, Coast Guard).
• Reserve and National Guard members called to active service under Title 10 federal orders.
• National Guard members on Title 32 § 502(f) full-time duty for more than 30 consecutive days, authorized by the President or the Secretary of Defense in response to a national emergency and federally funded. (Exactly 30 days does not qualify.)
• Commissioned officers of the Public Health Service or NOAA on active service.

A few SCRA protections outlast service — for example, mortgage foreclosure protection runs for one year after qualifying service ends (50 U.S.C. § 3953). The interest-rate cap runs during the period of military service — and for a mortgage, trust deed, or other security in the nature of a mortgage, one year after service ends (50 U.S.C. § 3937(a)(1)(A)). For all other obligations it ends when qualifying service ends (§ 3937(a)(1)(B)).

What debts are covered

• Credit cards (often the highest-impact use — card APRs commonly run far above SCRA's 6%).
• Mortgages signed before entering military service — the classic case is a Guard or Reserve member called to active duty after buying a home. For mortgage-type debt the cap also runs one year past the end of service (§ 3937(a)(1)(A)).
• Auto loans for vehicles owned before service began.
• Personal loans and lines of credit signed before service.
• Student loans — both private and federal (Direct and FFEL) — originated before service. 20 USC § 1078(d) expressly excepts 50 USC § 3937 from the federal-loan usury preemption, so the SCRA 6% cap does apply to pre-service federal student loans; loan holders check DMDC and usually apply it automatically. Separately, 20 USC § 1087e(o) provides 0% interest (no accrual) for up to 60 months on Direct Loans first disbursed on or after Oct 1, 2008, while serving on active duty (or qualifying National Guard duty) during a war, other military operation, or national emergency and serving in an area of hostilities that qualifies for special pay under 37 USC § 310 or § 351(a)(1) or (3).

Debts incurred after entering active duty do NOT qualify. Auto-loan refinances, balance transfers, and new credit accounts opened post-service-entry don't get the cap.

How to invoke the cap

1. Send a written notice to the lender requesting SCRA interest rate cap. Include account number, your name, and a request that the cap be applied retroactively to your service-entry date. Send it any time during service and no later than 180 days after you leave military service (§ 3937(b)(1)).
2. Attach a copy of your military orders (or a Statement of Service from your commander confirming active-duty status). Most lenders accept either; some accept a status report from the DoD's Defense Manpower Data Center SCRA website (scra.dmdc.osd.mil).
3. Expect some processing time — § 3937 sets no statutory processing deadline, so turnaround varies by lender. Once notice is received the lender must apply the cap retroactively to your service-entry date; a refusal is a federal violation and can be enforced through the U.S. Department of Justice or a private cause of action under § 4042.
4. Request a written confirmation showing the new effective rate, the retroactive adjustment, and any refund of excess interest already paid. Keep copies for your records.

If a lender refuses or delays beyond a reasonable period, escalate to your installation legal assistance office (free for service members) and consider filing a complaint with the DOJ Servicemembers and Veterans Initiative or your state attorney general.

Other SCRA benefits worth knowing

The interest-rate cap is one of about a dozen SCRA protections. Others commonly used:

• Lease termination: residential leases on any PCS orders or deployment of 90+ days; auto leases only on a PCS crossing outside the continental U.S. (or out of an OCONUS location) or deployment of 180+ days. Leases signed before entering active duty are also terminable (50 USC § 3955(b)).
• Eviction protection from family-residence rentals where rent is below an annually adjusted threshold (50 USC § 3951).
• Foreclosure protection on mortgages: lender must obtain court order for foreclosure during qualifying service, and for one year after, on mortgages signed pre-service (50 USC § 3953).
• Default judgment protection: courts cannot enter default judgment without an affidavit confirming the defendant is not in active service (50 USC § 3931).
• Stay of proceedings: courts must grant a stay of at least 90 days on application when military duties materially affect the member's ability to appear (50 USC § 3932).
• State residency for taxes: members and qualifying spouses may keep their pre-service state of residence for income-tax purposes regardless of where they are stationed (50 USC § 4001 — SCRA § 511, as amended by the Military Spouses Residency Relief Act and the Veterans Auto and Education Improvement Act of 2022).

Free legal advice on every SCRA matter is available at any Department of Defense installation legal assistance office. Use it before signing anything that might waive an SCRA right.