info@carolinalaw.com
info@carolinalaw.com
Servicemembers on active duty should feel secure about their own and their families’ financial well-being at home. That’s why federal laws like the Military Lending Act (MLA) offer crucial protections for service members and their dependents. If you are serving or are a dependent, you have specific rights to guard against predatory loans. Maginnis Howard can assist in determining whether your rights under the MLA have been violated and how to pursue the compensation you deserve.
First enacted in 2006, the Military Lending Act is a powerful defense for servicemembers and their families against high-cost loans with predatory terms. The most notable aspect of the Military Lending Act (MLA) is the annual percentage rate cap on a wide range of loans at 36% for active-duty military and their families. This Military Annual Percentage Rate (MAPR) cap works cumulatively and includes all interest and fees associated with the loan. For example, costs such as finance charges, credit insurance premiums, add-on products, and other fees are part of the total interest rate calculation. There are exceptions to some loan-related fees and costs, so if you are unsure whether your loan violates the MLA, reach out to our military consumer protection experts for a free consultation.
In addition to the limits on loan costs, the MLA imposes several loan requirements to protect servicemembers and their families.
Some shady lenders don’t want you to pay off your loan as soon as possible, and charge fees for satisfying a debt before it’s originally scheduled. Under the MLA, borrowers are allowed to pay off a loan without fear of penalties.
The MLA prohibits creditors from forcing servicemembers to waive their rights in mandatory arbitration clauses. Forced arbitration agreements require consumers to resolve legal disputes through a private arbitrator (a neutral third party) rather than a public court. These clauses are ubiquitous today and bar consumers from class action lawsuits to hold companies accountable. The MLA defends borrowers from having to waive their rights to get a loan.
Lenders cannot require you to establish an allotment to get a loan. An allotment is an automated payroll deduction that takes a portion of a servicemember’s paycheck. An allotment can be sent to several specific recipients, such as insurers, mortgagers, savings accounts, and more. This regulation prevents lenders from going straight to your paycheck as a condition of obtaining credit.
Creditors must provide a written statement of the Military Annual Percentage Rate and a clear description of the borrower’s obligation.
An important caveat about the MLA is that it also gives lenders the right to refuse you a loan. Shady lenders whose business models depend on predatory conditions are legally off the hook if they do not want to lend money to someone under the protection of the MLA. However, if the lender decides to initiate a loan to a person covered by the MLA, they must comply with the law’s requirement.
The MLA targets a broad scope of everyday credit and loan products. Examples include:
Generally, a “consumer credit” loan subject to the MLA is a loan for personal or family purposes that is subject to a finance charge or payable in more than 4 installments.
The MLA targets loans with short turnaround times and high interest rates. As such, many types are exempt, including:
Some of these loans are, however, protected under the Servicemembers Civil Relief Act. If you are unsure whether a loan should be protected or believe a violation has occurred, don’t hesitate to contact us for a free consultation.
Those whom the MLA protects are called “covered borrowers”. This generally includes:
Those servicemembers who are not on active duty are not considered covered borrowers. Additionally, a lender will require proof of status before every extension of credit.
Unfortunately, MLA violations are all too common. In 2025, the Consumer Financial Protection Bureau settled with pawn lender FirstCash. The business issued loans to active-duty servicemembers at interest rates exceeding the 36% maximum and required borrowers to sign an arbitration clause to obtain credit. Another recent CFPB lawsuit alleged that fintech company MoneyLion and its subsidiaries charged excessive interest rates exceeding the 36% rate cap and failed to make required disclosures. If you believe a lender is in violation of any of the protections you have under the Military Lending Act, contact us immediately.
Lenders who violate the MLA can face an array of financial and legal consequences, including:
To ensure you can recover appropriate damages, be aware of the statute of limitations on these cases. Military Lending Act claims generally must be filed within 2 years of discovering the violation. For that reason, it’s important to understand your rights and assess the conditions of your loan right away.
Maginnis Howard advocates for servicemembers and military families in the Carolinas on consumer protection issues, such as violations of the Military Lending Act. We provide free consultations to evaluate your case and outline your options. Contact us today if you believe a lender is violating the MLA or other laws. Our offices are conveniently located in Fayetteville, Raleigh, and Charlotte.
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The Servicemembers Civil Relief Act (SCRA) is another excellent protection for active duty servicemembers. Where the MLA applies to everyday credit and loans, the SCRA applies to mortgages, auto loans, and other long-term commitments.
The MLA is implemented by the Department of Defense (DOD) but the Consumer Financial Protection Bureau is responsible for compliance.