Military Lending Act (MLA)

The Military Lending Act is a federal law that provides protection from predatory lending practices for service members and their families when they take out loans. The Act caps the interest rates lenders can charge, and it also provides other protections, such as a prohibition on lenders requiring service members to waive their rights under the Act.

What is the Military Lending Act?

The act imposes a 36% APR cap on all consumer loans made to covered borrowers, and it also prohibits lenders from charging certain fees, such as prepayment penalties, excessive late fees, or mandatory arbitration clauses. Covered loans include payday loans, car title loans, refund anticipation loans, deposit advance loans, and unsecured closed-end and open-end lines of credit. This interest rate limit applies regardless of whether a lender is charging a fixed or variable interest rate. The MLA also provides additional protections for service members who are called to active duty.

What types of loans does the Military Lending Act cover?

The Act covers a wide range of loans, including:

• Mortgages
• Home equity loans
• Refinanced mortgages
• Auto loans
• Credit cards
• Deposit advance products
• Vehicle title loans
• Refund anticipation loans
• Deposit advance loans
• Installment loans
• Unsecured open-end lines of credit
• Secured open-end lines of credit

What other protections does the Military Lending Act provide for covered borrowers?

In addition to the Interest Rate Limits, the Military Lending Act provides several other protections for covered borrowers. For example, a creditor is generally prohibited from requiring a covered borrower to submit to arbitration or waive their right to a trial by jury. In addition, a creditor is prohibited from requiring a covered borrower to establish an account with the creditor in order to get the loan.

How does the Military Lending Act protect servicemembers from unfair practices?

The MLA prohibits creditors from extending certain types of credit to servicemembers, and limits the fees and interest rates that can be charged on covered loans.

What should you do if you believe a lender has violated the Military Lending Act?

You should contact your local consumer protection office or the nearest Armed Forces Legal Assistance office. You may also file a complaint with the CFPB.

Are there any exceptions to the Military Lending Act?

There are a few exceptions to the MLA. The first exception is for lenders who partner with the Department of Defense on a pilot program to test new products or services specifically designed for military families. The second exception is for bona fide agreements between a lender and a consumer in connection with a line of credit secured by the consumer’s dwelling. The third exception is for “assumable” mortgages, which are mortgages that can be transferred from one borrower to another.

In addition to capping interest rates, the MLA also requires lenders to provide certain disclosures to potential borrowers, prohibits mandatory arbitration clauses in lending agreements, and limits the fees that can be charged for covered loans.

What happens if a lender violates the Military Lending Act?

The Department of Defense’s (DoD) Office of the Inspector General (OIG) is responsible for investigating complaints of violations of the MLA. You can file a complaint with the OIG if you believe a lender has violated the Act.

The OIG will investigate your complaint and, if it finds that a violation occurred, will take appropriate action. This may include recommending the DoD take disciplinary action against the lender, referring the matter to law enforcement for criminal prosecution, or taking other action as appropriate.

You also have the option of filing a private lawsuit against a lender who violates the MLA. If you win your lawsuit, you may be entitled to recover damages, including attorneys’ fees and costs.

What other laws protect servicemembers from unfair lending practices?

In addition to the Military Lending Act, there are a number of other laws that protect servicemembers from unfair lending practices. The Servicemembers Civil Relief Act (SCRA) provides protections for servicemembers who are called to active duty. The Truth in Lending Act (TILA) requires lenders to disclose the terms and conditions of a loan before it is consummated. And the Equal Credit Opportunity Act (ECOA) prohibits discrimination in credit transactions on the basis of race, color, religion, national origin, sex, marital status, or age.

Where can I find more information about the Military Lending Act?

More information about the Military Lending Act can be found on the Consumer Financial Protection Bureau’s website: https://www.consumerfinance.gov/policy-compliance/guidance/regulatory-implementation/military-lending-act/.