Servicemembers covered by the Servicemembers Civil Relief Act include active duty members of the Army, Navy, Air Force, Marine Corps or Coast Guard and members of the National Guard called to active service for more than 30 consecutive days.
Woody Webb

OPERATION TOY DROP U.S. Army paratroopers prepare to board a C-130 Hercules aircraft at Pope Air Force Base, N.C., during Operation Toy Drop 2007, which supports area families by collecting toys for children. Many thanks for the photo to Senior Airman Clay Lancaster

As more and more members of the military uniformed services become rental-purchase customers, there are some things to keep in mind in handling their accounts. Of most importance is some working knowledge of the Servicemembers Civil Relief Act (“SCRA”) whose purposes are to strengthen the national defense through protections extended by SCRA so that servicemembers can devote all their energies to the defense needs of the Nation (without the worry of being hounded by creditors) and to provide for the temporary suspension of judicial and administrative proceedings/transactions that may adversely affect the civil rights of servicemembers during their military service.

Servicemembers covered by SCRA include active duty members of the Army, Navy, Air Force, Marine Corps or Coast Guard and members of the National Guard called to active service for more than 30 consecutive days. Section 532 of SCRA is the portion of the law pertinent to rental-purchase transactions. It provides that after a servicemember enters military service, a contract by the servicemember for the purchase or lease of personal property (including rent-to-own contracts) may not be rescinded or terminated for a breach of terms of the contract occurring before or during that person’s military service, nor may the property be repossessed for such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. This section only applies to a contract for which a deposit or installment (i.e., first rental payment) has been paid by the servicemember before he enters military service.

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Presumably, then, a servicemember who executes a rental-purchase agreement after he enters military service could be treated like any other customer (although if a Court action is initiated against a servicemember, he may apply for a stay of the proceeding for a period of not less than 90 days.) Why there is this distinction in the law I do not know given the purposes of SCRA. (Why should the rent-to-own contract of an active duty servicemember be subject to termination because

he was already active duty when he made his first payment?) In any event, I would urge dealers to give every consideration to all servicemembers.

In those cases in which a servicemember customer enters into a rental-purchase agreement after he is already in military service (and can thus generally be treated like any other customer), beware of the pitfalls of collection efforts. Even the most benign attempt to contact a servicemember customer regarding his account at his place of employment (i.e., on post) could have severe adverse effects. I have encountered the situation where the servicemember’s superior answering the telephone call from a rental-purchase store insisted upon asking highly probing questions about the servicemember’s account at least intimating that he had a legitimate right to such information. I have it on good authority that this situation is not unusual and that military supervisors will generally ask probative questions since they are eager to know what their subordinate troops are up to. Consequently, an attempt merely to locate a customer to request that he call back to discuss his account status may be converted into a potential violation of the State Debt Collection Act (the federal Act being inapplicable to those attempting to collect their own debts) prohibitions on third-party communications.

The military, it appears, takes a dim view of stiffing creditors. The Marine Corps, for example, expects its members to pay promptly all just financial obligations. If the Corps lawfully hears of a Marine’s failure to pay a debt, then that Marine may be the subject of “formal counseling” which will result in a written notation in the service record and is likely to have adverse consequences towards promotion. Such an outcome, if traced back to store personnel, may well be treated as a per se violation of the Debt Collection Act. Hence, my advice is to avoid entirely attempting to contact the servicemember customer at his place of employment and to make certain that the lawful collection policies and procedures of the dealer are adhered to strictly.

I am indebted to Michael S. Archer, JAG Office, USMC, Camp Lejuene, North Carolina for his assistance in preparing this article.

Woody Webb

NOTES ON THE RUN:

It is with some pleasure that I am able to report a profound setback to the social engineers who have been and are attempting to bury payday lending as a “debt trap.” According to a report of the Federal Reserve Bank of New York which studied the afteraffects of the ban on payday loans in Georgia and North Carolina, the prohibition on such transactions in those two states has led to more bounced checks, more problems with debt collectors and more Chapter 7 bankruptcies. It was also reported that distressed borrowers pawned more merchandise. Well, well.

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