All About the Military Lending Act (MLA)

Military Lending Act (MLA) benefits for servicemembers

Being in the military comes with numerous benefits. One of the most prominent privileges granted to active duty service members is the Military Lending Act (MLA) benefits.

The Military Lending Act limits military members’ interest rates and dependents’ interest rates. This legislation plays a vital role in safeguarding the financial well-being of military personnel. Why? Because they won’t have to think so much about vehicle title loans and payday loans. Moreover, they have a better chance of retaining their personal property.

This article will discuss the fundamentals of the MLA, including its provisions, benefits, and impact. Military personnel should fully utilize the privileges granted to them, and this article can provide a better understanding of their rights.

What Is The Military Lending Act (MLA)?

The Military Lending Act (MLA) is a federal legislation that provides special protections to active duty servicemembers, such as limiting their interest rates on many loan offerings. The MLA is applicable to service members on Active Duty, their spouses, and certain dependents. This law puts a cap on the interest rates imposed on different consumer loans to a maximum of 36% and gives other relevant financial safeguards.

In 2006, the Department of Defense (DOD) enacted and implemented the MLA. In 2013, statutory amendments were implemented so that there would be enforcement authority for the MLA’s requirements. These authorities include the the Federal Reserve System, the Board of Governors of the Federal Deposit Insurance Corporation, the National Credit Union Administration, the Consumer Financial Protection Bureau (CFPB), the Office of the Comptroller of the Currency, and the Federal Trade Commission.

In 2015, the Department of Defense introduced new updates to the MLA to expand military personnel’s benefits. These modifications include the following:

  • Extending MLA protections to different credit products
  • Modify the military annual percentage rate (MAPR) to involve particular charges
  • Change the provisions of the optional safe harbor to help creditors identify a covered borrower
  • Edit the disclosures to be given to a covered borrower
  • Alter the prohibition on renewing, rolling over, or financing consumer credit

What Are The Protections Granted By The Military Lending Act?

The MLA provides several protections, including the following privileges.

  • A 36% interest limit. The MLA prohibits you from paying more than 36% military annual percentage rate (MAPR), which includes extra costs like calculating your interest rate
  • Credit insurance premium
  • Finance charge
  • Add-on products sold with the credit
  • Miscellaneous fees for application, participation, or canceling contracts
  • No mandatory waivers of certain legal rights. A creditor isn’t allowed to require you to submit compulsory arbitration clauses or give up certain rights you’re entitled to because of state or federal laws.
  • No mandatory allotments. A creditor cannot create a voluntary military allocation for you to obtain a loan.
  • No prepayment penalty. You can avoid penalties if you pay back part of the loan early.

Provisions Of The Military Lending Act

While the MLA grants active duty personnel many privileges, there are provisions that they should be aware of.

Interest rate caps

The Military Lending Act stipulates that military personnel on active duty can be charged a maximum of 36% interest MAPR. This limit includes the costs of calculating the applicable interest rate. The MLA covers the following loans:

  • Payday credits, deposit advance products, tax refund anticipation loans, and vehicle title loans
  • Overdraft lines of credit excluding traditional overdraft services
  • Installment loans, with the exception of installment loans that are meant to fund the purchase of a personal property when the credit transaction was secured through that financed property
  • Some types of student loans
  • Credit cards

Mandatory Disclosures

Before the creditor is obligated to extend the privileges granted by the MLA, the covered borrower must provide certain information:

  • A statement of the MAPR that pertains to the consumer credit being extended
  • Any disclosure from Regulation Z will be provided only per the requirements of Regulation Z
  • A clear description of the payment obligation of the covered borrower, as applicable

Protections Against Predatory Lending Practices

Nowadays, predatory lending is prevalent, especially among those who don’t understand their rights as covered borrower status. This refers to any unfair practice that diminishes a borrower’s ability to repay debt and benefits the lender. Predatory lending practices include loans with high-interest rates, hidden and excessive fees, undisclosed terms, etc.

To protect military members, the Military Lending Act stipulates that lenders must adhere to specific rules, such as the prohibition of the mandatory arbitration clause.

The MLA prohibits the creditor from engaging in transfer, renewal, repayment, or consolidation of any consumer credit given to the covered borrower by the same creditor. This means that the military personnel’s debt can’t be piled up.

Moreover, the MLA prevents the creditor from charging a prepayment penalty to military personnel. A creditor can’t charge the individual extra because they paid part of the loan early.

Benefits And Impact Of The MLA

Improved Financial Protection For Military Borrowers

The Military Lending Act offers particular financial protections to service members, just like other federal laws like the Servicemembers Civil Relief Act. These protections encourage military members to pursue residential mortgages and buy personal property.

Reduced Risks Of Falling Into Debt Traps

Capping interest rates entails that covered borrowers are not allowed to be charged more than 36% interest annually. This lowers the chances of military personnel falling into debt for various reasons.

Mitigating The Negative Consequences Of Predatory Lending

Unfortunately, some individuals resort to unlawful acts to pressure people into financial problems. Federal laws like the Military Lending Act protect members of the military community from these harmful practices.

Promoting Financial Stability Among Military Families

The protection of laws such as the MLA grants military families the freedom to pursue financial stability. These protections offer them incentives to pursue loans that may improve their quality of life.

Criticisms And Challenges

While the Military Lending Act is intended to promote the financial well-being of military families, it is not perfect legislation. Some argue that the MLA had no significant effects on credit card ownership or limits among military members with subprime credit scores. Moreover, its expansion did not decrease the delinquency rate among borrowers with subprime credit scores.

There is an argument that there should be a balance between credit access and consumer protection. The MLA did not significantly enhance people’s eligibility to obtain loans for various products.

While this legislation was created with good intentions, some creditors still find loopholes to maximize their collection from covered borrowers. This may discourage military members from obtaining loans.

Compliance And Enforcement Of The Military Lending Act

It is the job of the creditor or credit union to understand the stipulations of the Military Lending Act and apply all the protections granted to members of the military community. It is their responsibility to adhere to the law and grant military personnel loans for personal property.

Select authorities are tasked to ensure that the MLA is followed by creditors nationwide. These institutions include the Board of Governors of the Federal Deposit Insurance Corporation, the Consumer Financial Protection Bureau (CFPB), the Federal Reserve System, the National Credit Union Administration, the Office of the Comptroller of the Currency, and the Federal Trade Commission.

Penalties for noncompliance to the MLA can be quite harsh. Those who violate this law may be obliged to pay criminal fees and imprisonment for up to one year. The consequences depends on a case-to-case basis.


The Military Lending Act can be instrumental in helping military personnel afford a better quality of life. Thus, it is vital that their protections are observed and their rights are enforced. Military personnel must understand their rights, and laws like the MLA and SCRA enable them to perform their duties with financial protection.

To know more about the Military Lending Act and other financial protections, such as the Servicemembers Civil Relief Act, explore our website further.


What types of loans are now covered under the MLA?

The MLA comprises a wide range of loans, like:

  • Deposit advance products, tax refund anticipation credits, payday loans, and vehicle title loans
  • Credit lines that are over drafted except for traditional overdraft services
  • Installment loans, except for loans related to personal property or a vehicle purchased
  • Certain student loans
  • Credit cards, but users don’t have to comply until October 3, 2017.

Who are covered borrowers under the Military Lending Act?

The Military Lending Act declares that military members on active duty are considered covered borrowers. These include active Guard and Reserves, their spouses, and selected dependents.

What is the penalty for MLA?

This varies on a case-to-case basis. Violators of the MLA may face fines and be imprisoned for up to one year.

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