What is 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 generally include:

• 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.

NOTE: Credit card companies didn’t have to comply with the MLA until October 3, 2017.

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 jewelry or a home appliance.

The MLA applies to active-duty servicemembers (including those on active Guard or active Reserve duty) and 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 generally includes the following costs in calculating your interest rate: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.
• 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 military allotment 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.

More information about the MLA can be found here. If you have an issue with a consumer loan, you should contact your closest legal assistance (JAG) office . You can also submit a complaint to the CFPB.

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