Payday & Title Loans: The SCRA Cuts Triple-Digit APRs to 6%

Every guide on this site applies the same law to a different debt. This one applies it to the ugliest debt in America, and produces the most violent rate cut the SCRA can deliver.

Payday storefronts cluster outside base gates for a reason: young customers, steady paycheck, thin credit file. A typical payday loan runs around 391% APR. A car title loan, around 300%. If you signed one of those before your active-duty start date, federal law has news for the lender. The legal maximum is now 6%. That cut removes roughly 98% of the loan’s cost.

Why “it’s a fee, not interest” doesn’t work

Payday pricing is built on a vocabulary trick. The loan doesn’t charge “interest,” it charges a “$15 fee per $100 per two weeks.” State usury laws sometimes fall for this. The SCRA was written not to.

The statute defines the interest it caps to include “service charges, renewal charges, fees, or any other charges (except bona fide insurance) with respect to an obligation or liability.” All-in, everything the lender charges, however labeled, divided by the year: that number cannot exceed 6% on a pre-service debt once you give notice with your orders.

Run the numbers on a $1,000 payday loan you’ve been rolling over:

	At 391% APR	Capped at 6%
Cost per year	~$3,910	$60
Cost per two-week cycle	~$150	~$2.30

The excess is forgiven, retroactive to your first day of duty. If you have been rolling this loan since before basic training, the lender likely owes you a recomputation and refund, not the other way around.

Title loans: the cap plus a shield

A pre-service title loan gets hit twice:

1. The rate collapses under § 3937, same as above. A $3,000 title loan at 300% drops from about $750 a month in charges to about $15.
2. The car becomes untouchable without a judge. If you made any payment before entering service, 50 U.S.C. § 3952 prohibits repossession without a court order for your entire period of service. The entire title-loan business model, quiet self-help repossession when the borrower stumbles, is illegal against you while you serve.

A storefront lender confronted with both sections almost always folds at the first letter. Their product cannot survive 6%, their collection method is a federal violation, and the DOJ’s enforcement record is public.

The during-service side: the MLA wall

The cap only reaches debt from before your start date. So what about the storefront that offers you a “military special” while you’re serving? That is the Military Lending Act’s lane. New consumer credit to members and dependents is capped at a 36% Military APR, with payday, title, and refund-anticipation loans explicitly in scope. The practical effect is that classic payday structures cannot legally be sold to you at all during service.

Which completes the picture this site keeps drawing. Debt timed before orders gets the 6% cap. Credit during service runs under MLA rules. There is no window where 391% is legal against a service member who knows these two laws. The only thing the lenders are counting on is that you don’t.

If you’re holding one of these loans right now

✅ Gut a predatory pre-service loan

1. Stop rolling it over. A renewal during service risks creating a new, uncapped obligation. The existing loan is the one the law protects.
2. Send written notice with a copy of your orders (letter generator), demanding 6% all-in from your active-duty start date and recomputation of everything paid since.
3. Title loan: add one sentence citing 50 U.S.C. § 3952. Repossession without a court order is prohibited.
4. Keep paying the lawful amount, principal plus 6%, on schedule. The dispute is about their charges, not your obligation.
5. If they stall, ignore you, or threaten the car: installation legal assistance office the same day, then a CFPB complaint. These lenders are uniquely allergic to both.
6. Money you free up goes at the balance. At 6%, every payment finally moves principal.

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

Maximum rate of interest on debts incurred before military service — 'interest' includes service charges, renewal charges, and fees — read the statute.