The Military Lending Act (MLA) is a federal law that provides special protections for active-duty service members like capping interest rates on many loan products. The MLA is located in the United States Code at 10 U.S.C. §987.
What are my rights under the MLA?
Answer: The MLA applies to active-duty service members (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 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 service members 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.
If a loan does not comply with the MLA, can a creditor not give me the loan because I am an active duty service member?
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.
Under the Military Lending Act (MLA), active-duty service members, their spouses, and certain dependents are entitled to specific protections when obtaining consumer credit. In New York, as in all states, these protections include a cap on interest rates at a 36% Military Annual Percentage Rate (MAPR), which encompasses finance charges, credit insurance premiums, and certain fees. The MLA prohibits mandatory waivers of legal rights, mandatory allotments for loan repayment, and prepayment penalties. Since 2015, the MLA has been expanded to cover a wider range of credit products, including payday loans, vehicle title loans, overdraft lines of credit, certain installment loans, and some student loans, but not traditional overdraft services or loans intended to finance the purchase of a vehicle or personal property when secured by the item. Credit cards were included under the MLA protections starting October 3, 2017. Loans not covered by the MLA include residential mortgages, loans to buy a motor vehicle secured by the vehicle, and loans for personal property secured by the property. Creditors may choose not to extend loans that would violate the MLA's provisions, as non-compliance can result in penalties under the Act.
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