SCRA Interest Rate Cap: How the 6% Rule Works for Service Members

What Is the SCRA Interest Rate Cap?

The Servicemembers Civil Relief Act (SCRA), codified at 50 U.S.C. §§ 3901–4043, provides a range of financial and legal protections to active duty service members. One of the most financially significant is the interest rate cap in 50 U.S.C. § 3937, which limits the interest rate on any debt incurred before entering active military service to a maximum of 6% per year.

This protection applies to all forms of interest, including service charges, renewal charges, and fees — not just stated APR. The only exception is bona fide insurance premiums (§ 3937(d)(1)).

What Debts Qualify?

The 6% cap applies to any obligation or liability incurred before the service member entered active duty. This includes:

• Credit card balances carried before activation
• Auto loans originated before service
• Student loans (private and federal) originated before service
• Mortgages and home equity loans (with extended protection — see below)
• Personal loans and lines of credit

Debts incurred after entering active duty do not qualify. The debt must pre-date the military service.

How Long Does the Protection Last?

The duration depends on the type of debt, as specified in § 3937(a)(1):

• Mortgages and real estate secured debt: The 6% cap applies during the period of military service and one year thereafter.
• All other debts (credit cards, auto loans, student loans, etc.): The cap applies only during the period of active military service. It ends on the date of separation or release.

The Interest Is Forgiven, Not Deferred

This is the most important and most misunderstood aspect of the SCRA cap. Under § 3937(a)(2), interest above 6% is forgiven — the lender cannot collect it later. It is not deferred to after service ends. The debt is permanently reduced by the forgiven amount.

Additionally, § 3937(a)(3) requires that the monthly payment be reduced by the amount of interest forgiven. The lender cannot keep the payment the same and apply the difference to principal — the payment itself must go down.

How to Invoke SCRA Protection

Under § 3937(b)(1), the service member must provide written notice to the creditor along with a copy of their military orders. This notice must be provided no later than 180 days afterthe date of termination or release from military service. The protection is effective retroactively from the date the service member was called to active duty.

Creditors may also independently verify active duty status through the Defense Manpower Data Center (DMDC) at scra.dmdc.osd.mil, and must apply the cap if the DMDC confirms active duty status (§ 3937(b)(1)(B)).

What Happens If a Lender Violates SCRA?

Under § 3937(e), any person who knowingly violates the interest rate cap is subject to a fine under Title 18, imprisonment for up to one year, or both. Service members who believe their lender has violated SCRA can file a complaint with the Consumer Financial Protection Bureau (CFPB) at consumerfinance.gov/complaint or contact their installation's Judge Advocate General (JAG) office.

Example: Credit Card at 22.99% APR

Source: Calculated using 50 U.S.C. § 3937 formula. Average credit card APR in 2026 is approximately 21–24% (Federal Reserve G.19 Consumer Credit Report).

SCRA vs. MLA (Military Lending Act)

The SCRA and the Military Lending Act (MLA, 10 U.S.C. § 987) are separate laws with different scopes. SCRA covers pre-service debts and caps the rate at 6%. MLA covers new consumer credit products taken out during active duty and caps the Military Annual Percentage Rate (MAPR) at 36%, which includes fees and add-on products. Service members may be protected by both laws simultaneously on different debts.