Servicemembers Rights: Civil Relief Act Protection in Repossessions

Servicemembers Civil Relief Act

If you are in the military and have defaulted on a car loan, the Servicemembers Civil Relief Act (SCRA) provides special protections against the repossession of your car. The creditor may still be able to repossess your car, but the lender must obtain a court order. To qualify, servicemembers must have signed the loan agreement and paid at least the deposit or first installment payment before entering military service.

Reasons for Repossession

Vehicle repossessions occur for a number of reasons. Most often, a vehicle is repossessed due to missed payments or the lapse of insurance. When a car is repossessed, lenders need to follow the law, whether payments were missed or not. If the lender overlooks the law, the servicemember may bring a lawsuit against the lender. 

Requirements AFTER Repossession

After a vehicle has been repossessed, the lender is required to send proper notices to the consumer. Shortly after the repossession, the lender will send the consumer a letter called a Notice of Intent to Sell Property. This will confirm the repossession occurred and detail terms for the consumer to retrieve the vehicle. If the consumer was not able to meet the terms, the lender may sell the vehicle at an auction or private sale. Once the sale has taken place, the lender will send a second letter to the consumer called a Deficiency Notice, which will inform the sale price of the vehicle and any remaining balance due.  If the consumer is not notified properly, there may be grounds to file a lawsuit against the lender.  

Impact of Car Repossession

Repossessions impact everyday life. Without a car, it’s difficult to get to work and handle household responsibilities. Daily activities, such as taking children to school or day care, tending to elderly family members, or attending medical appointments, become a chore. In addition, servicemen may face additional hardship, such as loss or denial of security clearance or other types of punishment based on mismanagement of their finances, resulting in harm to their credit reports.  

A common lender to servicemembers is the Navy Federal Credit Union of Vienna, VA. Navy Federal (NFCU) provides banking services to veterans serving in the Army, Navy, Marine Corps, Air Force, Coast Guard, Department of Defense, and their families. Many loans offered through NFCU to their members are auto loans for cars, trucks, and motorcycles. Servicemembers that have fallen behind on payments for auto loans and are facing repossession should seek the advice from an attorney in the JAG Corps who may direct them to a qualified consumer protection attorney to advise on their consumer rights.