MLA vs SCRA: The 6% Cap vs the 36% Rate Cap

Two federal laws protect servicemembers from predatory interest rates, but they are not interchangeable. The Servicemembers Civil Relief Act (50 U.S.C. § 3937) caps the rate on debt you carried into service. The Military Lending Act (10 U.S.C. § 987) caps the rate on credit you take out during service. Pick the wrong law for your loan and your request goes nowhere.

When each law applies

The split is timing.

The SCRA 6% cap lives in 50 U.S.C. § 3937. It covers obligations incurred before your period of active-duty service. That means a credit card you opened in college, a car note you signed before ship-out, a personal loan from before your commissioning date. The protection runs for as long as you are on active duty (and one year beyond for mortgages). To invoke it, send written notice and a copy of your orders within 180 days of leaving service.

The MLA lives in 10 U.S.C. § 987. It covers consumer credit extended to you or your dependents during active service. Congress passed it specifically to stop payday lenders, auto-title operations, and similar products from targeting servicemembers at the gate. The 36% MAPR ceiling is built into the law itself. You do not need to invoke it. A creditor cannot legally exceed the ceiling from the moment they extend credit.

The rates are not the same

The SCRA caps the interest rate at 6% per year. Under § 3937(d)(1), “interest” includes service charges, renewal charges, fees, and any other charges except bona fide insurance. Excess interest above 6% is forgiven, not deferred.

The MLA caps the Military Annual Percentage Rate at 36%. The MAPR is broader than a standard APR. Under § 987, it folds in all fees, service charges, renewal charges, and credit insurance premiums. A loan that looks reasonable by its stated APR can tip past the 36% MAPR ceiling once fees are counted. If a creditor exceeds the ceiling, the loan is void as to that excess, and the creditor faces criminal liability.

The 6% SCRA cap is lower and targets one specific kind of harm: the servicemember who took on a debt at a normal rate and then saw income drop when orders came. The 36% MLA ceiling is higher but functions as a hard stop against the worst predatory products at the point of origination.

Who and what each covers

The SCRA 6% cap covers the servicemember (and a jointly obligated spouse) on pre-service debt of nearly any kind. Mortgages, car loans, credit cards, student loans, personal lines. The category is broad. The timing is the limiting factor.

The MLA covers active-duty members and their dependents. It applies to payday loans, auto-title loans, tax refund anticipation loans, deposit-advance products, installment loans, and most open-end consumer credit plans. It expressly excludes residential mortgages and auto loans used to purchase the vehicle secured by the loan.

	SCRA (50 U.S.C. § 3937)	MLA (10 U.S.C. § 987)
Trigger	Debt incurred before active-duty service	Credit extended during active-duty service
Rate cap	6% per year (interest + most fees)	36% MAPR (interest + all fees + credit insurance)
Products covered	Nearly any debt type	Payday, title, installment, most open-end consumer credit (not mortgages or purchase-money auto loans)
Who is protected	Servicemember (and jointly obligated spouse)	Active-duty member and dependents
How you claim it	Written notice to creditor with orders (within 180 days of separation)	Automatic: creditor may not exceed the ceiling regardless of notice

An SCRA-eligible servicemember carrying a pre-service payday or title loan should look at the SCRA 6% cap, not the MLA, because the debt predates service. The MLA would not cover that loan in the first place, since the MLA trigger requires the credit to have been extended during service.

What these protections are not

Neither law cancels what you owe. The SCRA 6% cap reduces the rate and forgives the excess interest. It does not zero out the principal. The MLA voids unlawful terms but does not erase a valid loan.

The SCRA cap does not apply to mortgages or auto loans bought during service. Those are not pre-service obligations.

The MLA does not cap the rate on credit from before you joined. It also does not cover residential mortgages or loans secured by the purchased vehicle, regardless of when the debt was incurred.

Know the trigger for each law. Apply the right one.

✅ Figure out which cap your loan gets

1. Pin down the date you incurred the debt. Look at the original contract, not a refinanced version.
2. Compare that date to your active-duty start date. Debt before service: look to the SCRA 6% cap under § 3937. Credit taken during service: look to the MLA 36% MAPR ceiling under § 987.
3. Confirm the loan type. The MLA excludes residential mortgages and purchase-money auto loans. The SCRA covers nearly any pre-service debt.
4. For SCRA: send written notice with your orders to the creditor. Request the rate reduction back to your active-duty start date.
5. For MLA: the ceiling is automatic. If a creditor charged above 36% MAPR on covered credit, contact your installation legal assistance office. The excess is void by law.

📜 The law behind this: 10 U.S.C. § 987 and 50 U.S.C. § 3937

Military Lending Act; SCRA interest rate cap — read the statute.