More Financial Tips for Our Military Personnel -- and a Mea Culpa

Dear Readers,
I surrender! We received tons of mail on this question:

What do you know about the "Savings Deposit Program" for AD personnel serving in a combat area? What I have been told is that these military people may earn a guaranteed interest rate of 10% on their savings account. Apparently this is some program left over from the Vietnam era. Any additional information on this would be appreciated.



"Unfortunately, the program you refer to appears to have applied specifically during the Vietnam War era" is what I said last week. I was wrong!

Although the "Savings Deposit Progam"(SDP) for Vietnam era military personnel ended on June 30, 1974, there is a new SDP in effect which covers current military operations. These include the Operation Joint Endeavor Area (Bosnia-Herzogovina, Croatia, etc.) as well as the Persian Gulf.

Thus, members of the Armed Forces serving "outside the United States or its possessions under arduous conditions (as determined by the Secretary of Defense) in connection with a contingency operation" are allowed to make deposits of "unallotted current pay and allowances" into an account which will earn a guaranteed return of 10%. However, the maximum amount subject to this interest rate is $10,000 (except for a service member who is in "missing " status).

For complete details go to

Actually, I just said this program no longer existed to see if anyone really reads the complete column... OK, OK, I should have double-checked my source. Now which branch do it enlist with?...

Many thanks to those who took the time to set me straight.



I would like to thank those of you who wrote about the recent column focusing on Financial Tips for those serving in our armed forces.

Ms. Buckner,

Thank you for your support of American Troops! Your article was very informative and I am passing it on to my sergeants for use in their financial planning class that they are giving next month.


Michael Hendricks,

US Army

Camp Doha, Kuwait


Dear Lt. Col. Hendricks,

It is we here at home in the states who are thanking all of YOU! We're all so proud of the way our Armed Forces are representing our country. My thanks to you and to the many others who wrote to express their appreciation for the information. I hope your sergeants find the article useful. Perhaps they'll consider adding this week's column to their course, as well.

God bless,

Gail Buckner

A number of readers also wrote asking for details about the "Soldiers' and Sailors' Civil Relief Act."

What can you tell me about the Soldiers and Sailors' Act?

I am particularly interested in who must comply with it and who is exempt. For instance, one of my creditors and my mortgage company (although dragging their feet) are reducing our interest rate but another creditor said they are exempt from it, with no further explanation available. I am interested in finding out what the rules are in regard to this so I can decide whether to pursue it further or drop it.

Any insight would be appreciated.

Thank you,




I have heard that for a military person on active duty, they can request that any outstanding loan that they have be refinanced at some lower rate. I have heard that this rate is around 6%. Do you know about this, and who does one contact for more information?



Dear Stacey & Dennis,

You are not alone in asking about this landmark legislation passed in 1940. The Soldiers' and Sailors' Civil Relief Act (SSCRA) was designed to prevent an individual's military obligation from wreaking havoc on their personal finances. As such, it provides far-reaching creditor protections for members of the military, particularly those who move from "reserve" to "active duty" (A/D) status.

Among other things, provided your ability to pay is "materially affected" by being called up to active duty, SSCRA:

- Requires lenders (mortgage company, credit card issuers, etc.) to lower their interest rates on all pre-active duty debt to 6%;

- Can allow you to postpone any civil proceedings you were involved in before you went A/D, such as a divorce or bankruptcy;

- Can prevent items purchased on credit from being repossessed without a court order;

- Can stop a landlord from evicting you or your family, provided your monthly rent is $1,200 or less;

- Can prevent your home from being foreclosed;

The important thing to understand is that the Soldiers' and Sailors' Civil Relief Act can only help you if you first help yourself. The first step is to be aware it exists. The second is probably to pay a visit to the Judge Advocate General posted to your base or camp. Explain your situation and find out if SSCRA applies and how to proceed.

Reduce Your Credit Card Bills

One of the most important provisions of this legislation is that it mandates that all creditors reduce the interest rate they are charging you on purchases/loans made before you went on active duty status. The maximum rate that can be charged is 6%.

The only exception to this is federally-guaranteed student loans. Although legislation is pending which would subject these to the same maximum rate, at this point, these loans are not included. However, the Department of Education has reportedly announced it will extend your payment period if you can demonstrate that you can't keep up the payments.

Of course, if your student loan is not federally-guaranteed, you can request the interest rate be reduced to 6% and the lender must do so.

Knocking down a credit card interest rate of 18-21% to 6% can mean big savings if you racked up a lot of debt prior to going A/D. But this doesn't happen automatically. How would your credit card company know you got shipped off to Iraq two months ago? To get this lower rate, you must notify each creditor and request it. (The Army's Web site noted at the bottom of this response contains suggested form letters.)

According to Col. Paul Conrad, Director of Reserve Component Training and Mobilization Issues in the Army's Office of the Judge Advocate General, the process is pretty straightforward:

"The individual contacts the lender or debt holder in writing, notifying them of their active duty status and requesting that they reduce their interest rate to 6%. It's a good idea to include a copy of your active duty orders."

When you return home and go off active duty status, you are required to notify your creditors of this.

A couple of points are worth noting: Conrad says, typically, a credit card company will comply by suspending your account and lowering the annual percentage rate to 6%. However, then they typically issue you a new, temporary card. If you use the new one, the 6% cap does not apply. Remember, this debt relief is only available on pre-active duty debt. So any debt you accumulate after you are on A/D is not covered by SSCRA.

Your best bet is probably to try to avoid using the new account. If you start using the new card, the lender can charger whatever rate is currently in effect.

After you return to "reserve" status and resume your civilian job, your old interest rate will be reinstated. However, your creditors are not allowed to hit you with a balloon payment to make up for the lower interest rate you received while active. This isn't "temporary" relief; it's permanent.

A maximum annual percentage rate of 6% for as long as you are on active duty. Period.Just be sure to keep up with your payments and you'll be fine.

While there is no definition of "materially affected," it's usually pretty apparent. The fact is, most reservists (though not all) see their incomes decline when they are called up. For instance, a doctor who earns $150,000/year as a civilian might sees her salary drop to $70,000 when she is called to active duty -- a decline of more than half her annual income.

But there are other circumstances that would "materially affect" your ability to keep up with your debts. Take the married reservist whose spouse had to quit her job in order to care for their children full time while he's overseas. Although he might actually be earning more than he did in his civilian job, the total household income could be down considerably due to the loss of the spouse's income.

However, Conrad points out there have been cases where a reservist was turned down for the reduced, 6% interest rate. In one, the officer who applied for interest rate relief had a trust fund worth over a million dollars. Her bank successfully argued that although her reservist salary was less than her civilian salary, her ability to keep up her payments was not affected because she had the trust fund to draw from.

But here's the critical thing to understand: it is not up to the person in the military to prove he/she has been "materially affected." The burden is on the creditor to prove why you should not receive the discounted interest rate.

Stacey, since one of your creditors is balking on this, Conrad says you can turn the tables on the company and file a lawsuit. Unfortunately, this means hiring an attorney. However, judges and juries are usually pretty sympathetic.

As a first step, Conrad suggests you speak with the JAG officer assigned to your post. (Who knows? Since Col. Conrad used to teach at the Army's JAG school, the officer might be one of his ex-students!) Under an agreement between the Departments of Defense and Justice, the US Attorney's office in your home district is supposed to help enforce the provisions of the Soldiers and Sailors Civil Relief Act. And you might be surprised how many US Attorneys happen to be reservists and veterans themselves. Sometimes all it takes is a phone call or letter to the right person at the credit company.

In one extreme case in Louisiana involving an individual who was called up to serve in Bosnia, Conrad says the reservist won a six-figure settlement against a bank that refused to reduce the rate on his business loans and then foreclosed on him. His settlement also covered all his legal costs. (Cathey vs. First Republic Bank, 2001 US Dist.Western District Louisiana, 2001.)

What About a Car Lease?

A common question that comes up with regard to SSCRA is whether this act allows you to terminate a car lease. The answer: No. Conrad says that's because the law was written in 1940 and there was no such thing as an auto lease! In fact, the Soldiers' and Sailors' Civil Relief Act does not provide cover to cancel any "personal" leases. For instance, in addition to cars, this would include your cell phone and furniture you might be renting.

Although SSCRA doesn't allow you to cancel a lease, it also prohibits the lessee from re-possessing the property. While you're out hunting down the most-wanted members of Saddam's regime, your spouse isn't going to see the refrigerator and bedroom set carried off by the furniture rental agency.

And the auto dealership can't send someone over to hot-wire your car and tow it away. Nothing like this can happen without a court order. And if it comes to a court hearing, you can request a "stay" or postponement until you return home.

As far as a leased auto goes, Conrad says "a good JAG attorney might be able to convince the leasing company that it's in their best interest to cancel the contract and waive the penalty." If they don't go for the "Be-a-Patriot" argument, then they might be convinced by the practical one: the car's just sitting in the parking space, it's not being driven, who knows if the insurance policy is still being paid, what if the mag wheels get stolen, etc., etc. In other words, it's better to take back the car now while it's still in pretty good shape.

However, there are some leases that SSCRA does allow you to cancel: those involving both residential and commercial real estate. Provided you entered into the lease before you were called to active duty, you just have to give the landlord a 30-day notice to break your lease. Moreover, according to Conrad, you don't have to show your ability to pay has been "materially affected." Also, this provision does not get you out of reimbursing the landlord for any improvements made to commercial property on your behalf.

Prevent Your Family from Being Evicted

If your monthly rent is $1,200 or less, the Soldiers' and Sailors' Civil Relief Act prohibits a landlord from evicting you or anyone left living in the home. In fact, the government gets so upset about this, there are criminal penalties for any landlord who tries to pull this off. A bill recently introduced by New Jersey Congressman Smith (HR 100) would update SSCRA by raising the rent ceiling to $1,700/month.

Slim Protections for College Students

Because of the generous subsidies the government provides, Conrad says about 30% of all Reservists and National Guard members are enrolled in college or vo-tech school.

Unfortunately, currently there are no protections for students. There have been cases where a reservist was accepted at graduate school, got called to active duty, and lost his/her place in that year's class. Some colleges will keep the tuition you've paid for the class you were unable to complete and tell you you've got to pay for another full semester because you missed the final exam!

The good news is that a number of bills are pending which would provide relief in this regard. In the meantime, you might want to contact the Service Members Opportunity Colleges. This organization can help mediate tuition and reinstatement with your college. However at this point it has no authority to compel a college to comply.

Called Up in the Midst of a Lawsuit

If it's a civil action such as divorce, bankruptcy or any other case where you have the potential for personal loss, the Soldiers' and Sailors' Civil Relief Act permits you to ask the court for a "stay." This delays any further proceedings until you are back home and able to defend yourself.

I'm Not a Deadbeat Dad, I Just Can't Afford It Right Now

There's a section of SSCRA that Conrad calls "The Unknown Provision." It deals with something called "anticipated relief." In other words, if you know ahead of time you're going to get called up and won't be able to keep up with your obligations, you can got to any court in the United States and request extra time to pay. In addition, you cannot be charged any late fees, fines or penalties.

This part of the act does not eliminate your obligation, it just gives you more time to pay it. For example, if you are paying child support, you could ask the court to reduce your payments while you're on active duty and receiving a lower salary. You'll eventually have to make up the amount when you get home. But in the meantime, your military wages won't be garnished. Unfortunately, you'll need to find an attorney who understands this Act to represent you since, according to  Conrad, most local courts are unfamiliar with this part of it.

This strategy works with other types of debt as well, such as property taxes. The court can order than your payments be extended even after you've returned home. The relief period can be as long as the length of time you were A/D. The important thing is to apply for this either before you go active duty or short thereafter.

Folks, this just scratches the tip of the iceberg. Your JAG office has a wealth of information. You can also go online and search the respective website for your service branch.

You might want to start with the website for Department of Defense because it's got lots of links to other sites:

Those form letters for requesting a reduced interest rate are on the Army's website under the "Legal Services" section:

Come home safely,




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The views expressed in this article are those of Ms. Buckner or the individual commentator, and do not necessarily reflect the views of Putnam Investments Inc. or any of its affiliates. You should consult your own financial adviser for advice regarding your particular financial circumstances. This article is for information only and is not an offer of the sale of any mutual fund or other investment.