Borrowers -- whether for mortgage loans, credit card debt or auto loans -- who have been called up for military duty have just been given greater financial and legal protections. On December 19, 2004, President Bush signed into law the "Servicemembers Civil Relief Act" (SCRA).

Under this new law, "Servicemembers" are defined as persons on active duty in the military, but also includes National Guard members who have been called up for active duty for more than 30 days.

If yourself or a family member have been called into active duty, all of your lenders should be immediately notified, and you must send them a copy of the military orders. Once the lender has been put on notice, it must reduce all interest payments down to six percent, and most importantly, must forgive all pre-service debts which exceeded this six percent cap. It should be noted that this protection applies only to debts incurred before the borrower went into active military service; debts incurred while on active duty are not similarly protected.

Since the start of World War II, there was a law known as the Soldiers and Sailors Civil Relief Act. That law also required lenders to automatically reduce the interest rate obligations of persons in active military service down to six percent. However, it was not clear that all interest above the six percent cap was to be forgiven. SCRA clarifies this, with clear language in Section 207 of the Act that "interest at a rate in excess of six percent per year ... is forgiven."

The old Soldiers and Sailors Relief Act was a very powerful tool designed to assist servicemen and women whose income is less while on active duty than what it was in civilian life. However, that law was enacted over 60 years ago, and times have changed. Additionally, various Court cases have given different -- and often conflicting -- interpretations of that old law. Accordingly, Congress decided to update and clarify the rights of our service men and women. The stated purpose of SCRA is:

To provide for, strengthen, and expedite the national defense through protection extended by this Act to servicemembers of the United States to enable such persons to devote their entire energy to the defense needs of the Nation; and to provide for the temporary suspension of judicial and administrative proceedings and transactions that may adversely affect the civil rights of servicemembers during their military service.

It should be noted that the reduction in the interest rate must be accompanied by a reduction of the monthly payment. The lender cannot require you to continue to pay your same payment each month, and credit more toward principal.

In addition to mortgage and other debt payments, the new law provides other important relief to the men and women in our Armed Services.