Financial Readiness
How one federal law caps the cost of most consumer credit for active-duty members and their families.
Base legal assistance handles consumer protection, contracts, and financial legal matters. U.S. Air Force photo, Kirtland AFB, DVIDS (public domain).
The Military Lending Act, or MLA, is a federal law. It caps the cost of most consumer credit for active-duty service members and their covered dependents at a 36% Military Annual Percentage Rate, or MAPR. The MAPR is an all-in rate. It folds in interest plus most fees, so it is a tighter limit than a plain interest rate.
The cap targets the loans that hit service members hardest: payday loans, vehicle title loans, deposit advance products, overdraft lines of credit, and most installment loans. Know the shield, and you can spot when a lender is trying to get around it.
One number and three rules cover most of the protection. Learn them, and a high-cost lender has nowhere to hide.
36%
the Military Lending Act caps the all-in Military APR (MAPR) on most consumer credit for active-duty members and covered dependents. The MAPR folds in interest plus most fees.
Three more protections
Know the shield and you can spot a lender trying to dodge it.
Source: CFPB
The MLA caps the all-in cost of covered credit at a 36 percent MAPR. The MAPR is not just the interest rate. It generally folds in finance charges, credit insurance premiums or fees, add-on products sold with the loan, and certain fees like an application or participation fee. That matters, because a lender cannot dress up a high-cost loan by moving the cost out of the rate and into the fees.
It protects active-duty service members and their covered dependents. That includes members serving on active Guard or active Reserve duty. Covered dependents generally means a spouse and children. If you are on active duty, the protection travels with your family, not just with you.
The MLA gives you more than a price ceiling. A lender cannot make you give up rights you hold under state or federal law, like the Servicemembers Civil Relief Act. Arbitration means being forced to settle disputes outside court, and a covered lender cannot push you into it. A lender also cannot require an allotment, which is money pulled straight from your pay, just to get the loan. And it cannot charge a penalty for paying the loan back early.
The shield is wide, but it has a clear edge. Knowing the carve-out is what keeps you from assuming a cap that is not there.
Covered: Payday loans, vehicle title loans, deposit advance products, overdraft lines of credit, and most installment loans. Credit cards too, since October 2017.
Not covered: A car loan secured by that car, a loan for personal property secured by it, and home mortgages.
Use it
Keep your loan paperwork. The numbers on it are what prove a violation.
Source: CFPB · eCFR
The MAPR sweeps in costs that a standard APR can leave out, like certain fees and the cost of credit-related add-on products. A Defense Department report to Congress describes the MAPR as the total of interest, fees, and other charges, which cannot top 36 percent. So the MAPR is a stricter measure than the APR you might see in a civilian ad. It closes loopholes the APR alone would leave open.
You do not have to fight a bad lender alone. Start with your installation legal assistance, or JAG, office, which is free and handles consumer credit issues. You can also get free financial counseling for the military community through Military OneSource, and you can file a complaint about a lender with the CFPB. All three are linked in Sources below.
Does the 36% cap apply to my credit card?
Yes. Credit card companies had to start following the MLA on October 3, 2017.
Does the MLA cover my car loan?
No, not a loan you take to buy a car that is secured by that car. That financing is carved out of the cap.
Does it protect my spouse and kids?
Yes. Covered dependents are protected, which generally includes a spouse and children.
