New Fayetteville Office Address
200 Dick Street, Suite A, Fayetteville, NC 28301
info@carolinalaw.com
200 Dick Street, Suite A, Fayetteville, NC 28301
info@carolinalaw.com
Find answers to the most frequently asked questions about the Military Lending Act (MLA). If you don’t see the answer to your question here, contact us for more information.
The Military Lending Act (MLA) is a federal law enacted in 2006 that protects active-duty servicemembers and certain dependents from predatory lending practices. One of the most notable protections is a 36% cap on the “Military Annual Percentage Rate” (MAPR) for covered lines of credit. The MLA also bans several loan terms common in predatory lending, such as mandatory arbitration clauses and mandatory payroll deductions.
The MLA refers to those it protects as “covered borrowers”, including:
Your eligibility depends on your active-duty status at the time a loan is extended.
Yes, military spouses and certain covered dependents are covered by the Military Lending Act. However, to qualify, they must be enrolled in the Defense Enrollment Eligibility Reporting System (DEERS).
Instead of the Military Annual Percentage Rate (MAPR) applying only to interest, it applies to the total of interest, finance charges, credit insurance premiums, add-on products, and other loan fees. This calculation ensures that lenders can’t shift the cost of a lower interest rate back to the consumer through excessive fees.
The MLA protects servicemembers and their families on everyday consumer credit including:
Typically, the MLA applies if the credit is for personal use and involves a finance charge, or if it is repayable in over 4 installments.
Several common, longer-term credit products are exempt from the MLA:
Some of these excluded loans may still be protected under the Servicemembers Civil Relief Act (SCRA).
Both laws protect the financial well-being of servicemembers and their families. However, the MLA applies to everyday consumer credit, like credit cards, payday loans, and installment loans. It also protects borrowers from mandatory arbitration or allotments. On the other hand, the SCRA covers longer-term obligations, such as mortgages, auto loans, and leases. It also provides interest rate reductions on pre-service debt and safeguards against default judgments and evictions while on active duty.
No. Many lenders include a mandatory arbitration clause as a condition of a loan. It forces consumers to settle disputes with a private mediator rather than in court. This drastically reduces your options for pursuing justice for wrongful lending practices, including class-action lawsuits. The MLA explicitly prohibits lenders from forcing borrowers to sign away their legal rights.
No. Lenders cannot require a servicemember to set up a military allotment (an automatic payroll deduction) as a condition of getting credit.
No. Covered borrowers have the right to pay off all or part of a covered loan early without a prepayment penalty.
The MLA requires lenders to disclose certain terms at the time the credit is extended. They must provide:
Yes. The MLA does a lot to protect consumers, but it does not guarantee your right to a loan. Lenders who don’t want to abide by the law can legally refuse to give you a loan.
Knowing your rights is the first step to stopping illegal lending activity. Common red flags include:
If you believe your Military Lending Act rights have been violated, contact us immediately for assistance.
Several companies have faced MLA lawsuits, and often, they have faced more than one. Frequent offenders include:
Unfortunately, the potential for Military Lending Act violations goes beyond this list. If you believe a company has violated your rights, let us know.