The Military Lending Act (MLA) is a Federal law that provides special protections for active duty servicemembers like capping interest rates on many loan products.
What are my rights under the MLA?
Answer: The MLA applies to active duty servicemembers (including those on active Guard or active Reserve duty), spouses, and certain dependents. It limits the interest rates that may be charged on many types of consumer loans to no more than 36% and provides other important protections.
Your rights under the MLA include:
- A 36% interest cap. You can’t be charged more than a 36% Military Annual Percentage Rate (MAPR), which includes costs like the following in calculating your interest rate (with some exceptions).
- Finance charges
- Credit insurance premiums
- Add-on credit-related products sold in connection with the credit
- Fees like application fees, participation fees, or fees for debt cancellation contracts, with some exceptions.
- No mandatory waivers of certain legal rights. A creditor can’t require you to submit to mandatory arbitration or give up certain rights you have under State or Federal laws like the Servicemembers Civil Relief Act.
- No mandatory allotments. A creditor can’t require you to create a voluntary military allotment in order to get the loan.
- No prepayment penalty. A creditor can’t charge a penalty if you pay back part – or all – of the loan early.
What types of loans are now covered under the MLA?
Answer: In 2015, the Department of Defense (DoD) expanded by rule the types of credit products that are covered by the MLA. In general, the consumer credit products now covered when offered to active-duty servicemembers and their covered dependents include, but are not limited to:
- Payday loans, deposit advance products, tax refund anticipation loans, and vehicle title loans;
- Overdraft lines of credit but not traditional overdraft services;
- Installment loans but not installment loans expressly intended to finance the purchase of a vehicle or personal property when the credit is secured by the vehicle or personal property being purchased; and
- Certain student loans.
- For credit cards, creditors didn’t have to comply with DoD’s new rule until October 3, 2017.
What types of loans are NOT covered under the MLA?
Answer: There are some loans the MLA doesn’t cover – namely, credit that is secured by the property being purchased and certain other secured loans. These loans generally include:
- Residential mortgages (any credit transaction secured by an interest in a dwelling), including financing to buy or build a home that is secured by the home, mortgage refinances, home equity loans or lines of credit, or reverse mortgages;
- A loan to buy a motor vehicle when the credit is secured by the motor vehicle you are buying; and
- A loan to buy personal property when the credit is secured by the property you’re buying, like a home appliance.
Read the MLA Applicability Flow Chart
If a loan does not comply with the MLA, can a creditor not give me the loan because I am an active duty servicemember?
Answer: Generally, yes. If the loan exceeds the 36% interest cap or if the loan violates other provisions of the MLA, creditors that give you the loan could be subject to penalties under the MLA.
Contact your local Judge Advocate General’s (JAG) office to learn more about lending restrictions and your rights as a servicemember. You can use the JAG Legal Assistance Office locator to find help or ask your installation financial readiness office for information. You can also submit a complaint to the CFPB.
FAQs
The Military Lending Act (MLA) says that you can't be charged an interest rate higher than 36% on most types of consumer loans and provides other significant rights. The MLA applies to active-duty servicemembers (including those on active Guard or active Reserve duty) and covered dependents.
What is the MLA military lending act? ›
MLA is a program that provides certain protections in lending for servicemembers who are called to Active Duty. From this site. Users may submit a Single Record Request to obtain a report certifying Title 10 active duty status for provisions under MLA. An account is required to use the Single Record Request.
Is the military lending act still in effect? ›
As of October 3, 2016, most types of consumer loans offered to active-duty servicemembers and their dependents have to comply with the Military Lending Act (MLA).
What loans are not covered by the military lending Act? ›
Types of credit covered by the Military Lending Act
The MLA doesn't apply to all credit, though. Mortgages, home equity loans, lines of credit and certain secured loans, including secured auto loans, are not covered under the MLA.
What is the maximum interest rate for the military lending Act? ›
A 36% interest cap.
You can't be charged more than a 36% Military Annual Percentage Rate (MAPR), which includes costs like the following in calculating your interest rate (with some exceptions). Finance charges. Credit insurance premiums.
Who qualifies for MLA benefits? ›
The Military Lending Act (MLA) says that you can't be charged an interest rate higher than 36% on most types of consumer loans and provides other significant rights. The MLA applies to active-duty servicemembers (including those on active Guard or active Reserve duty) and covered dependents.
What is the penalty for violating the military lending act? ›
What are the penalties for violating the MLA? Knowing violation of the MLA is a crime punishable by a fine and up to a year in jail. Any promissory note or contract violating the MLA is void from its inception.
What is the final rule of the military lending Act? ›
In July 2015, the Department of Defense (Department) issued a final rule (July 2015 Final Rule) amending its regulation implementing the Military Lending Act (MLA) primarily for the purpose of extending the protections of the MLA to a broader range of closed-end and open-end credit products, rather than the limited ...
Do veterans qualify for military lending Act? ›
The MLA does not cover military retirees, unless they are also dependents of a borrower who is eligible for protections under the MLA. Same-sex spouses and certain unremarried former spouses may also be covered under MLA. *Military dependents are specifically defined under MLA as follows: Spouses.
What are two things under the MLA that creditors cannot do? ›
A creditor cannot: Use the title of a vehicle as security for the obligation involving the consumer credit. prepaying all or part of the consumer credit. after the extension of credit in an account established in connection with the consumer credit transaction.
10 U.S.C. § 987(f)(5)(E) (emphasis added). According to the court, the MLA's two-year discovery provision is properly viewed as a statute of limitations, whereas the five-year provision is considered a statute of repose, which limits the time to file a claim in the absence of discovery.
Is a credit card covered by MLA? ›
Some examples of additional credit products now subject to MLA protections when made to covered borrowers include: Credit cards; Deposit advance products; Overdraft lines of credit (but not traditional overdraft services); and.
What is the difference between MLA and SCRA? ›
The Military Lending Act is more recent. But what are the differences between the SCRA and the MLA? First, the SCRA is much more expansive, but generally only affects debts and obligations incurred before active duty. Also, the MLA covers mostly consumer transactions entered into while in active service.
Who enforces the military lending act? ›
The FTC enforces the Act as to most non-depository institutions, and is part of the interagency group with whom the DoD is required to consult at least every two years.
Who are the covered borrowers under the military lending Act? ›
A “covered borrower” is a consumer who, at the time the consumer becomes obligated on a consumer credit transaction or establishes an account for consumer credit, is a covered member of the armed forces or a dependent of a covered member (as defined in 32 CFR 232.3(g)(2) and (g)(3)).
What written disclosures are required under the military lending act? ›
(3) A clear description of the payment obligation of the covered borrower, as applicable. A payment schedule (in the case of closed-end credit) or account-opening disclosure (in the case of open-end credit) provided pursuant to paragraph (a)(2) of this section satisfies this requirement.
What is the purpose of the MLA Act? ›
The Military Lending Act1 (MLA), enacted in 2006 and implemented by the Department of Defense (DoD), protects active duty members of the military, their spouses, and their dependents from certain lending practices. restricts loan rollovers, renewals, and refinanc- ings by some types of creditors.
What is the purpose of the MLA? ›
Modern Language Association, or MLA, format is a style of crediting sources you use to write a paper. This style is typically used for research papers for English Composition and other communication classes. Use our MLA Citation Guide to learn how to cite sources in this style.
What does MLA mean in mortgage? ›
You will need to sign the Mortgage Loan Agreement (the MLA). The MLA outlines the specific terms and conditions of your loan. For example, the MLA will describe your interest rate, term, payment information and whether the mortgage is open or closed to prepayment.
