The Servicemembers’ Civil Relief Act (SCRA) gives certain protections to military borrowers. The most well-known amongst the lending industry are, in very simple terms, the requirement for a military affidavit when seeking a default judgment, reducing the interest rate to 6 percent for pre-services loans, and the protection from foreclosure for a pre-service loan without a court order under Sections 521, 527, and 533, respectively. The actual period of protection for the servicemember borrower is often a key question in an SCRA analysis.
A servicemember is protected during the period of his or her “military service” as defined under Section 511 of the Act, which is intuitive. But one aspect of SCRA coverage that is sometimes overlooked is the fact that the servicemember is also protected during the time period before the commencement of his or her actual active duty date. In fact, the period of protection begins when he or she receives the orders to report. This time period has come to be called the “early alert” notification period. Section 516 of the SCRA sets out that a military reservist is entitled to the “rights and protections” of the SCRA “during the period beginning on the date of the member’s receipt of the order and ending on the date on which the member reports for military service.” When examining the Department of Defense Manpower Data Center (DMDC) website for the status of the military borrower, the “early alert” or “Future Call-Up” section is the last row of boxes and looks like:
The DMDC should serve as the principle means to determine whether a borrower is protected under the “early alert” notification scheme, or the SCRA in general. If there is some hint that the servicemember received the orders prior to the actual active duty start date, however, the period of protection should reflect the date of receipt. Many times military orders can be a challenge to decipher, but where it can be determined that the orders were received at a certain date prior to the start of the active duty date, the SCRA protection should expand to the earlier date.
The idea or rationale behind “early alert” notification section stems from the fact that military members often have numerous financial and personal obligations to get in order before deployment or mobilization, normally within 30 to 60 days. They could be looking at a long deployment that will impact finances and family life, so Congress saw fit to extend SCRA protections during this preparation or “spin up” period. Financial institutions should be aware of the “early notification” protection period when dealing with military borrowers.