Association of Military Banks of America

Military Consumer Month:  Military Lending Act (MLA)

Amy Miller, AFC®

Military Consumer Month is recognized each year in July to increase awareness of the consumer protections in place for servicemembers, Veterans, and their families.

This week, we’re covering the protections provided by the Military Lending Act. to service members and their families when taking out loans while on active duty.

Military Lending Act (MLA)

Enacted in 2006 and expanded in 2015, the MLA is a Federal Law implemented by the Department of Defense (DoD). It provides protection from predatory lending practices for active-duty service members and their dependents.

THE MLA protects all active-duty service members, National Guard on Title 10 orders, AGR troops, and Reserve members when activated for 30 days or longer. Eligible spouses and dependents under the age of 21 or 23 who are enrolled in school full-time and registered in DEERS (Defense Enrollment Eligibility Reporting System) also qualify for protections under MLA.

Protections Under MLA

The MLA caps interest rates and fees on many loans and credit lines as an “all in” annual interest rate cap of 36% and requires lenders and creditors to disclose both verbally and in writing exactly how much the loan will cost the borrower, including interest, finance charges, credit insurance, application fees, etc. These fees along with the interest rate are included in the “all in” annual interest rate cap, commonly referred to as the MAPR (Military Annual Percentage Rate).

The MLA also prohibits lenders and creditors from forcing servicemembers and their dependents into arbitration or waiving their rights, including their rights under the SCRA (Servicemembers Civil Relief Act). It also bans lenders from requiring the service member to create an allotment to qualify for a loan, preventing a member from paying a loan off early, or charging a pre-payment penalty.

Loans & Types of Credit Covered by MLA

The MLA offers service members and their dependents protections for certain types of loans and credit lines including:

  • Unsecured Installment Loans (typically personal loans paid back over a set timeframe with fixed payments)
  • Credit Cards
  • Payday Loans & Deposit Advance Loans (short-term, lower dollar amount loans that are typically due to be paid back on the borrower’s next payday)
  • Vehicle Title Loans
  • Tax Refund Anticipation Loans
  • Pawn Loans
  • Overdraft Lines of Credit (used to prevent a checking account from overdrawing)
  • Some Student Loans

Loans that are not covered by the MLA include:

  • Mortgages, home equity loans or lines of credit, and reverse mortgages
  • Auto loans when the automobile is used as collateral
  • Loans secured by goods being purchased including furniture, electronics, and appliances

Qualifying for MLA Protections

The creditor or lender is responsible for identifying if the borrower qualifies for MLA protections. The Department of Defense (DoD) maintains a database that can be used by both lenders and service members to confirm MLA protection qualifications. Lenders in violation of the MLA can be penalized.

For issues with a consumer loan, reach out to the nearest base legal office for assistance. Search here to find a location near you. Service members can also file a complaint with the Consumer Financial Protection Bureau.

If a covered borrower is unable to gain access to lending options, the service member or family member can reach out to the military relief societies. The relief societies assist members and their families with emergency expenses when unable to qualify for a loan.

Relief Societies:                    

Air Force Aid Society
Navy-Marine Corp Relief Society
Army Emergency Relief

Military One Source offers free financial counseling that can assist with debt management and other financial issues. A session can be scheduled online or by calling 800-342-9647.

AMBA and its member banks support our Nation’s Service Members and Veterans by offering services to help them achieve greater financial independence, resiliency, and capability.

Partnering with the US Department of Veteran Affairs (VA), AMBA created the Veteran’s Benefit Banking Program (VBBP) and now offers a free session with a credit counselor for Veterans wanting help with debt management. Learn more and schedule a session here.