Month: October 2013

American Forces Information Service

If you’re a reserve component service member called to active duty, you’re protected by a law that can save you some legal problems and possibly some money as well.
Under the provisions of the Soldiers’ and Sailors’ Civil Relief Act of 1940, you may qualify for any or all of the following:

• Reduced interest rate on mortgage payments.
• Reduced interest rate on credit card debt.
• Protection from eviction if your rent is $1,200 or less.
• Delay of all civil court actions, such as bankruptcy, foreclosure or divorce proceedings.

“Although all service members receive some protections under the SSCRA, additional protections are available to reserve components called to active duty,” said Lt. Col. Patrick Lindemann, deputy director for legal policy in the Office of the Undersecretary of Defense for Personnel and Readiness. Most active duty service members are familiar with the provisions of the SSCRA that guarantee service members the right to vote in the state of their home of record and protect them from paying taxes in two different states.

One of the most significant provisions under the act limits the amount of interest that may be collected on debts of persons in military service to 6 percent per year during the period of military service. This provision applies to all debts incurred prior to the commencement of active duty and includes interest on credit card debt, mortgages, car loans and other debts. The provision, Lindemann emphasized, applies to pre-service debts, and the interest rate reduction doesn’t occur automatically — service members must request it.

Once a service member requests the rate reduction, the creditor must either comply or apply for court relief. The SSCRA puts the burden on the creditor to show that military service has not “materially affected” a member’s ability to repay the debt. The court generally grants relief if the creditor can make his case.

Lindemann advised that service members notify lenders of their intent to invoke the 6 percent cap in writing, along with proof of mobilization/activation to active duty and evidence of the difference in the member’s military and civilian pay. This could prevent creditors from attempting to challenge interest rate reduction requests in court.

The interest rate cap does not apply to federal guaranteed student loans. However, according to Lindemann, the Department of Education has in the past deferred or suspended payments on student loans for reserve component military members called to active duty. Service members should contact their lenders or schools to determine if such a program has been implemented and its eligibility requirements.

Another key provision under the SSCRA protects your dependents from being evicted while you are serving your country. If you rent a house or apartment that is occupied for dwelling purposes and the rent does not exceed $1,200 per month, the landlord must obtain a court order authorizing eviction. This provision applies regardless of whether quarters were rented before or after entry into military service.

In cases of eviction from dwelling quarters, courts may grant a stay of up to three months or enter any other “order as may be just” if military service materially affects the service member’s ability to pay the rent. This provision is not intended to allow military members to avoid paying rent, said Lindemann, but rather to protect families when they cannot pay the rent because military service has affected their ability to do so.

Another significant protection under the act relates to civil proceedings. Service members involved in civil litigation can request a delay in proceedings if they can show their military responsibilities preclude their proper representation in court. This provision is most often invoked by service members who are on an extended deployment or stationed overseas. “I would recommend a service member contact the unit or installation legal office immediately if they receive notice of court proceedings against them,” Lindemann said. “Civil court proceedings can involve very complex issues and no one should do anything, including requesting a stay of proceedings, prior to seeking legal advice.”

To learn more about these or other provisions of the Soldiers’ and Sailors’ Civil Relief Act, contact your unit or installation legal assistance office.

View a brief history of the Soldiers’ and Sailors’ Relief Act of 1940

Frequently Asked Questions

I have an existing credit card balance. Can I get any relief from the finance charges?

You have rights. As a general matter, when you enter active duty, you should notify your card issuer. The maximum interest rate you can be charged on any amount you owed before entering active-duty service is 6 percent. For this purpose, interest includes not just periodic interest charges, but also other finance charges and fees related to the debt. One such fee is an annual fee.

For members of the full-time active-duty military, SCRA protections begin the day you enter military service. For a Reservist or Guardsman, SCRA protections begin the day you receive your mobilization orders.

To get the benefit of the SCRA, you must notify your credit card company of your active-duty status in writing. You must send a written letter to the card issuer and include a copy of your orders. Include in your letter a request to reduce your interest to 6 percent while you are on active duty.

Some credit card issuers may even be willing to reduce your interest rate further than the SCRA requires.

I have been on active duty and have returned home. I just learned that I could have gotten a reduction in the interest rate on my credit card while I was on active duty. Is it too late for me to get this reduction?

You have up to 180 days after you are released from active duty to let a lender know that you were on active duty.

You should write your credit card company and send a copy of your military orders. If you do so within this 180-day time period, you are entitled to have your interest rate reduced to 6 percent. This reduction is effective for the period from the date you entered active duty through the date you were released from active-duty status.

If I ask my credit card company to reduce the interest rate on my balance while I am on active duty, can it close my account or reduce my credit line?

No. Under the law a lender cannot revoke or reduce your credit because you have exercised your right to a reduced interest rate under the Servicemembers Civil Relief Act.

If I ask my credit card company to reduce the interest rate on my balance while I am on active duty, can that hurt my credit rating?

No. It is against the law for a lender to make an adverse credit report because you exercised your rights under the Servicemembers Civil Relief Act.

Can I get any reduction in the interest rate I am charged on any new purchases I make using my credit card while I am on active duty?

The law regulates only the interest rate on amounts that you owed at the time you entered the military service or were called up to active duty.

If you make purchases with your card while on active duty, you can be charged your regular APR on this new balance. However, your card issuer must apply towards the new balance any monthly payment you make that exceeds the minimum amount due. This will reduce the total amount of interest you pay on the card.

Some credit card companies may give you a reduced interest rate on new purchases as well as on the balance you owed when you went on active duty. You should check with your credit card company to see what, if anything, it will do for you.

I believe that my rights as a servicemember have been violated by my credit card issuer. What should I do?

You should contact the nearest Armed Forces Legal Assistance Program office.

Dependents of servicemembers can also contact or visit local military legal assistance offices where they reside. You can get help online to find an office, whether you are within the continental United States or anywhere else worldwide. Another potential source of assistance that may be helpful even if you are no longer on active duty is the American Bar Association.

The Fair Credit Reporting Act allows members of the armed forces who are on deployment to place an “active duty alert” on their credit reports. This can help members of the military on active duty to prevent identity theft. The alert requires creditors to verify your identity before granting credit in your name.

Identity theft occurs when someone uses your personal information – like your name, your Social Security number, or your credit card number – to commit fraud. Identity thieves may use your information to open a new credit card account in your name. Then, when they don’t pay the bills, the delinquent account is reported on your credit report. Inaccurate or fraudulent information could affect your ability to get credit, insurance, or housing, now or in the future. People whose identities have been stolen can spend months or years cleaning up the mess the thieves have made of their names and credit records.

If you are a member of the military and away from your usual duty station, you may place an “active duty alert” on your credit report to help minimize the risk of identity theft while you are deployed. When a business sees the alert on your credit report, it must verify your identity before issuing you credit. The business may try to contact you directly, but if you’re on deployment, that may be impossible. As a result, the law allows you to use a personal representative to place or remove an alert. Active duty alerts on your report are effective for one year, unless you request that the alert be removed sooner. If your deployment lasts longer, you may place another alert on your report.

To place an “active duty” alert, or to have it removed, call the toll-free fraud number of one of the three nationwide consumer reporting companies: Equifax, Experian, or Trans Union. The company will require you to provide appropriate proof of your identity, which may include your Social Security number, your name, address, and other personal information.

• Equifax: 800-525-6285; www.equifax.com
• Experian: 888-EXPERIAN (397-3742); www.experian.com
• TransUnion: 800-680-7289; www.transunion.com

Contact only one of the three companies to place an alert – the company you call is required to contact the other two, which will place an alert on their versions of your report, as well. If your contact information changes before your alert expires, remember to update it.

When you place an active duty alert, your name will be removed from the nationwide consumer reporting companies’ marketing lists for prescreened offers of credit and insurance for two years – unless you ask that your name be placed on the lists before then. Prescreened offers – sometimes called “preapproved” offers – are based on information in your credit report.

You can take steps to protect your finances and credit while you’re protecting our country.  Before you ship out on a military deployment, read these tips and talk with your family.

Get your financial house in order

Make sure your financial records are accurate and up-to-date. This means giving your husband or wife (who will be paying the bills for the next several months) all bank account and credit card numbers, a record of assets and outstanding debts, a list of typical expenses such as rent and utilities, and all phone numbers and addresses necessary for dealing with financial matters.

Consider granting a power of attorney

Granting a power of attorney to your spouse or another trusted family member will allow that person to handle financial matters in your absence. They’ll have the legal right to sign important papers and take other actions on your behalf. Military installation legal assistance offices can help service men and women set up a power of attorney.

Power of attorney gives the person considerable authority to spend your money and take on new debt in your name. If you are not comfortable granting that much control, the power of attorney can be limited to a specific area of your financial affairs. It can also be limited to a certain period of time. A limited power of attorney can be revoked by you at any time by filing notice with the county Register of Deeds.

Take care of taxes

Before deployment, decide how your taxes will be filed and who will file them. If your spouse will be taking on tax duty for the first time, make sure he or she has all necessary documents. The IRS also allows military personnel to file for an extension by using Form 2350.

Watch out for scams

Military spouses should be especially careful while their husband or wife is away on active duty. Beware of work-from-home scams and home repair scams.

Guard your identity

There’s another threat that you may face while serving your country—the threat of identity theft. The risk of ID theft can be higher while you’re on active duty because it can be more difficult to watch over your credit. Take steps to protect your identity, like getting a free security freeze. A security freeze stops credit reporting agencies from releasing any information about you to new creditors without your approval. That can stop identity thieves from getting new credit in your name.

An Active Duty alert is another way of getting protection against ID theft while you are away from your usual duty station.

Both you and your landlord have rights and responsibilities. By law, your landlord is required to keep your unit in good and safe working order and to follow relevant state and local codes. When you discover that something needs to be fixed, let your landlord know about the problem immediately over the telephone or in person. Your landlord doesn’t have to fix the problem until you tell him about it in writing, so follow up with a written request and keep a copy for your files.

If your landlord does not respond in a reasonable amount of time, you may decide to pay to repair an emergency problem yourself. Be sure to keep copies of all receipts so that you can seek reimbursement from your landlord.

Don’t withhold rent to convince your landlord to make repairs. Instead, try to work out a cut in your rent. For example, the landlord may allow you to pay to fix a broken refrigerator and then subtract the cost from your next month’s rent. Or, the landlord may agree to reduce your rent for a month during which you could not use one room because of a leaky roof.

If the landlord fails to fix something that puts your safety at risk or violates local codes, report it to local authorities. Local building, health, fire and safety inspectors can take action to ensure compliance with the codes.

If you and your landlord aren’t able to settle your disputes, file a complaint with the Consumer Protection Division in your State.

Additional Information

Many States have laws that  sets a limit on the amount of rent owed by military personnel who end their leases early because of premature or involuntary discharge or due to a permanent change in duty station that requires a move of more than 50 miles.

Under the circumstances specified in the law, military personnel can break their lease by giving written notice to their landlord at least 30 days in advance of their move date. The notice must include a copy of their official military orders or a written verification signed by a commanding officer.

Military personnel are responsible for paying rent until their move date.

Finally, if your monthly rent is $1,200 or less, the federal Soldiers’ and Sailors’ Relief Act (SSRA) can stop your family from being evicted while you are serving active duty.

In February of 2010, Undersecretary of Defense Clifford Stanley reported to the US Treasury Department that nearly three out of four military financial counselors had provided advice to service members on issues related to abusive auto financing. Pentagon officials are concerned that service members’ worries about finances, which frequently include auto loans, are having a negative impact on military readiness. They also see patterns of unfair business practices that frequently target military personnel.

In one common scam, called the Yo-Yo, unscrupulous car dealers use trickery to try to squeeze more money out of car buyers. After the buyer signs a sales contract that includes the terms of their loan, they drive their newly purchased vehicle off of the sales lot. But a few days or weeks later, the car salesman calls the buyer back to the lot and claims that the loan financing has fallen through.

The salesman says the buyer will need to pay more cash in order to keep the car or renegotiate the loan with a less favorable interest rate. If they refuse, the buyer may find that their new car has been blocked in on the sales lot so it can’t be moved. The buyer may be told that their trade in vehicle has already been sold. Some dealers may also try to refuse to return the buyer’s down payment. However, the buyer has a legal right to request that the original deal be “unwound” if the financing falls through, and that all of their money be refunded.

Another tactic involves loading up the loan financing contract with expensive options. These include theft deterrent systems, vehicle service contracts, extended warranties, extra insurance to cover loan payments if the vehicle is involved in an accident, and even credit life insurance and disability insurance policies for the buyer. These unnecessary items can cost buyers a lot of money over the life of their loan.

That vehicle looks great on the car dealer’s lot and you know you’d look great behind the wheel. But when you go car shopping, don’t be in a hurry. Make sure you’re getting a fair deal, especially if you’re buying a used vehicle. Research the car’s history and get a mechanic to look it over before you sign anything. And remember, a used car is usually sold “as is.” If it breaks down after you drive it off of the lot the dealer isn’t responsible for fixing it. 

“It’s a fact that military personnel love their cars. Sadly, many of them end up paying far more for them than they should.” Holly Petraeus, wife of General David Petreaus and Director of the Council of Better Business Bureaus’ Military Line, which provides consumer education for service members

Scam artists who prey on members of the military and their loved ones have no shame. But there are ways to avoid getting ripped off by these heartless crooks. 

Never pay up-front to get a loan or a credit card

You may have seen advertisements promising easy access to loans, even if you have bad credit. These =advance fee= loan scams try to get you to pay for their help getting a loan, but once you pay, the loan never materializes. To steer clear of advance fee loan scams, watch out for loan brokers who promise or suggest that they can get a loan for you if you pay a fee first. In many States, it’s illegal for a loan broker to charge an advance fee to obtain a loan or a credit card for a consumer.

Legitimate lenders will not charge you money upfront. Typically, advance fee loan schemes claim that you must make the first and last monthly payments or pay five percent of the principal so that you won’t lose the loan to others who are competing for it. Don’t agree to pay anything until after the loan has closed. And steer clear of advance fee credit card offers, too. Scammers may offer credit cards with a pre-approved limit and low interest rates for an upfront fee. They’ll ask for your bank account information and so they can authorize an electronic draft to pay the fee. In most cases, they simply take money from your account and you never get a credit card. 

Watch out for people who try to exploit a military connection

Scammers are always looking for ways to get a potential victim to lower their guard. Some will try to gain your trust by claiming a connection to the military. Just because a business puts a military reference or term in its name doesn’t mean it provides good service to military personnel. If someone seems to be using your shared military service to get you to purchase a product or make an investment, be wary. Don’t let anyone exploit your patriotism or cause you to set aside your healthy skepticism about spending or investing your money.

 Avoid self-serving “Financial Planners”

Deployment pay… a reenlistment bonus… retirement pay. Any event that puts cash into the hands of a service man or woman represents an opportunity for an unscrupulous investment advisor. Despite recent crackdowns on companies that target members of the military for investments that carry high fees, military personnel remain at risk. Roth IRAs and the military’s Savings Deposit Program are among the safest ways to protect your hard-earned dollars. 

Get insurance you need, not what someone wants to sell you

Some insurance agents try to use high-pressure tactics to maneuver military personnel into purchasing insurance they don’t need. Agents are now barred from trying to sell insurance at mandatory-attendance meetings on base, and they can’t use senior personnel to help them pitch their policies. But outside the gates, many insurance agents still try to convince service personnel to buy inappropriate insurance. Instead, max out your government-provided insurance. The Servicemember’s Group Life Insurance (SGLI) provides outstanding insurance at a great price.