Important Lending Protections for Military, The Military Lending Act

The Military Lending Act applies to active-duty servicemembers (including those on active Guard or active Reserve duty) and your covered dependents.

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 the following costs in calculating your interest rate (with some exceptions):
• Finance charges,
• Credit insurance premiums or fees,
• Add-on products sold in connection with the credit, and
• Other fees like application or participation fees, with some exceptions.

          TIP: 

          Credit card companies don’t have to comply with the MLA until October 3, 2017.  It’s possible that some of their common fees, like cash advance fees and foreign transaction fees, won’t be included in the overall MAPR calculation.

• No mandatory waivers of consumer protection laws.   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. An allotment is an automatic amount of money taken from your paycheck to pay back your loan.
• No prepayment penalty. A creditor can’t charge a penalty if you pay back part – or all – of the loan early.

Types of loans covered under the Military Lending Act

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).  These credit products include, but are not limited to:

• Payday loans, deposit advance products, and vehicle title loans;
• Overdraft lines of credit but not traditional overdraft services; and
• Installment loans, with the exceptions noted below. 

If you’re a servicemember on active duty and decide to take out one of these loans, you have rights under the MLA, including a limit on the interest rate the creditor can charge.  

There are some loans the MLA doesn’t cover – namely, credit that is secured by the property being purchased. These loans include:

• Residential mortgages (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 vehicle or home appliance. 

If you have an issue with a consumer loan, you can submit a complaint to the CFPB. They’ll forward your complaint to the company and work to get a response from them.

Contact your local Judge Advocate General’s (JAG) office to learn more about lending restrictions. You can use the JAG Legal Assistance Office locator to find help. You can also ask your installation financial readiness office for information.

* This information was compiled from the Consumer Financial Protection Bureaus website.

Published Aug 7, 2017.