Compliance Blog

Categories: Consumer Lending

SCRA: National Guard Protections - Title 10 v. Title 32

From time to time, the NAFCU Compliance team receives questions about whether the activation of a member of the National Guard triggers SCRA protections for that member. In other words, does the National Guard member constitute a servicemember covered by the protections of the Servicemembers Civil Relief Act (SCRA)? The answer depends on how the National Guard member was called to duty.

It is important to remember that many SCRA protections are in place during a servicemember's military service. This is true of the six percentage interest rate cap for loans incurred before military service:

"(a) Interest rate limitation

(1) Limitation to 6 percent

An obligation or liability bearing interest at a rate in excess of 6 percent per year that is incurred by a servicemember, or the servicemember and the servicemember's spouse jointly, before the servicemember enters military service shall not bear interest at a rate in excess of 6 percent-

(A) during the period of military service and one year thereafter, in the case of an obligation or liability consisting of a mortgage, trust deed, or other security in the nature of a mortgage; or

(B) during the period of military service, in the case of any other obligation or liability." See, 50 § USC 3937(a)(1)(A) and (B).

It is also true about the prohibition on repossessing a servicemember's automobile without a court order when the servicemember has made a deposit or installment payment before entering military service:

"(a) Protection upon breach of contract

(1) Protection after entering military service

After a servicemember enters military service, a contract by the servicemember for-

(A) the purchase of real or personal property (including a motor vehicle); or

(B) the lease or bailment of such property,

may not be rescinded or terminated for a breach of terms of the contract occurring before or during that person's military service, nor may the property be repossessed for such breach without a court order.

(2) Applicability

This section applies only to a contract for which a deposit or installment has been paid by the servicemember before the servicemember enters military service." See, 50 § USC 3952(a)(1) and (2).

For National Guard members, what does military service mean? It means

"a call to active service authorized by the President or the Secretary of Defense for a period of more than 30 consecutive days under section 502(f) of title 32 for purposes of responding to a national emergency declared by the President and supported by Federal funds[.]" See, 30 § USC 3911(2)(A)(ii).

Section 502(f) of title 32 of the United States Code reads in relevant part:

"(f)(1)Under regulations to be prescribed by the Secretary of the Army or Secretary of the Air Force, as the case may be, a member of the National Guard may-

(A) without his consent, but with the pay and allowances provided by law; or

(B) with his consent, either with or without pay and allowances;

be ordered to perform training or other duty in addition to that prescribed under subsection (a).

(2) The training or duty ordered to be performed under paragraph (1) may include the following:

(A) Support of operations or missions undertaken by the member's unit at the request of the President or Secretary of Defense.

(B) Support of training operations and training missions assigned in whole or in part to the National Guard by the Secretary concerned, but only to the extent that such training missions and training operations-

(i) are performed in the United States or the Commonwealth of Puerto Rico or possessions of the United States; and

(ii) are only to instruct active duty military, foreign military (under the same authorities and restrictions applicable to active duty troops), Department of Defense contractor personnel, or Department of Defense civilian employees.

(3) Duty without pay shall be considered for all purposes as if it were duty with pay."

So the short answer to the question posed at the beginning of the blog is that the term military service as it is used in the SCRA only covers National Guard members in very limited circumstances - when they are called to active service by the President or Secretary of Defense under 32 § USC 502(f) for a period of 30 or more consecutive days. And making sure you understand the difference can help the credit union avoid costly compliance issues like the one covered in a NAFCU Compliance blog a couple of weeks ago.

While the SCRA may not protect National Guard members in other situations, for example, when the National Guard is called to service by a state governor, states may have their own version of an SCRA-type law or provide other protections to National Guard members. Your credit union may wish to consult with local counsel for an assessment of whether there are any relevant state laws that might affect your credit union's obligations toward these types of National Guard members who may not be covered by the SCRA.

About the Author

David Park, NCCO, Regulatory Compliance Counsel, NAFCU

David joined NAFCU in September 2018.  As part of the Regulatory Compliance Team, he provides daily compliance assistance to member credit unions on a variety of topics. 
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