The Military Lending Act (36% Cap)
The SCRA covers debt from before you served; the Military Lending Act caps NEW consumer credit taken out while you serve at a 36% MAPR, and bans the predatory terms that target troops.
Timing decides the rate cap: debt from before service is SCRA (50 U.S.C. § 3937); credit taken during service is MLA (10 U.S.C. § 987).
The Military Lending Act is the other statute, and confusing it with the SCRA costs people money. The SCRA caps interest at 6% on debt you took on before you served. The MLA caps it at 36% on consumer credit you take out while you serve.
They point in opposite directions in time, which is the thing to hold on to. Old debt, SCRA. New debt, MLA. Neither one is a fallback for the other, and a lender that correctly applies one may be quietly ignoring the other.
The MLA cap is not the interest rate on the paperwork. It is the Military Annual Percentage Rate, which sweeps in fees and add-ons that a stated APR leaves out, and that is why payday and add-on-heavy products fail it.
You do not have to do anything to get it. The 36% ceiling and the banned-terms list bind the lender the moment covered credit is extended, with no notice letter and no orders to send, which is the opposite of the SCRA. Your job is to recognize a violation: a MAPR above 36%, mandatory arbitration, a prepayment penalty, a required allotment, or a waiver of your rights. Under § 987(f) a contract that breaks those rules is void from inception.
Congress passed the MLA in 2006 in the John Warner National Defense Authorization Act for Fiscal Year 2007, after a DoD report documented payday and title lenders clustering outside base gates. The first rule (2007) reached only payday, vehicle-title and tax-refund-anticipation loans, and lenders restructured products to slip around it. A 2015 DoD rule extended "consumer credit" to track the Truth in Lending Act definition, with compliance mandatory on October 3, 2016, and on October 3, 2017 for credit cards. That expanded rule is the one in force.
At a glance
- Statute
- 10 U.S.C. § 987
- Rate cap
- 36 percent Military Annual Percentage Rate
- Who is covered
- Covered members of the armed forces and their dependents
- Applies to
- Consumer credit extended while covered, including credit originated over the internet
- Required disclosures
- The APR, Truth in Lending disclosures, and a clear description of payment obligations, given orally AND in writing before the credit is issued
- The SCRA by contrast
- 6 percent, and only on obligations incurred before military service
- Direction in time
- MLA looks forward at new credit. SCRA looks back at pre-service debt
- Covered products
- Payday, vehicle-title, tax-refund-anticipation and deposit-advance loans, most installment loans, credit cards, and most open-end consumer credit
- Excluded
- Residential mortgages, and a loan that buys the vehicle or goods that secure it (a purchase-money car loan)
- When status is fixed
- When you become obligated on the credit or open the account; coverage ends once you are no longer a covered member or dependent (32 CFR 232.3(g)(4))
- Notice required?
- None. The cap and the banned terms apply automatically
Start here
- You want the basics first: MLA vs SCRA, side by side
- You are working out whether the 36% cap applies to you: Who counts as a covered borrower
- You are checking whether a product is covered: Which credit the MLA covers
- You want to know what goes into the rate: How the MAPR is calculated
- A lender broke the rules: MLA violations and enforcement
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National Guard and Reserve MLA: Covered Only on Orders Over 30 Days
The MLA covers Guard and Reserve members on orders not specifying 30 days or fewer, judged the day you open the account. Which orders count, and when it ends.
36% all-in vs full APR
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MLA MAPR Explained: The 36% Rate That Counts the Fees
The MLA cap is a Military APR, not a normal APR. It folds in fees, credit insurance, and add-ons. See a loan under 36% APR that is over 36% MAPR.
Catch a hidden over-36% loan
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MLA Covered Borrowers: Who the 36% Cap Protects
The MLA covers active duty, Guard/Reserve on qualifying orders, and dependents, not veterans or retirees. Plus the DoD database check and lender safe harbor.
Confirm 36% coverage in 30 seconds
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MLA Protections Beyond the 36% Cap: The Banned Terms
The MLA also bans mandatory arbitration, waivers of your SCRA rights, prepayment penalties, and required allotments, and mandates written and oral disclosures.
Void a loan with a banned term
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MLA Violations: Void Loans, $500 Damages & Enforcement
A loan that breaks the MLA is void from inception. Sue for actual damages, at least $500 per violation, punitive damages, and attorney fees under 10 USC 987.
At least $500 per violation
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MLA Covered Credit: What Loans the 36% Cap Reaches
The MLA covers payday, title, installment, and most credit cards, but excludes mortgages and purchase-money car loans. What counts as covered consumer credit.
Know if 36% applies to your loan
Frequently asked questions
What is the difference between the MLA and the SCRA?
Timing and rate. The SCRA caps interest at 6% on obligations you incurred before entering military service. The MLA caps the Military Annual Percentage Rate at 36% on consumer credit extended to you while you are a covered member. One looks backward at old debt, the other forward at new credit.
Why is the MAPR higher than the APR my lender quoted?
Because the MAPR is designed to capture the true cost. It reaches charges that a stated APR can leave out, which is why products that look compliant on their face can breach the 36% ceiling once fees and add-ons are counted.
Does the MLA cover my spouse?
Section 987 applies to a covered member of the armed forces or a dependent of such a member, so dependents are within the statute’s protection.
Do I have to notify the lender to get the 36% MLA cap?
No. The 36% MAPR ceiling applies by operation of law from the moment a covered borrower is extended covered consumer credit. There is no notice requirement and no form, unlike the SCRA 6% cap, which you invoke with written notice and a copy of your orders. If a lender charged a covered borrower more than 36% MAPR on covered credit, the loan violated the law when it was made.
Does the Military Lending Act cover credit cards and car loans?
Credit cards, yes, since October 3, 2017. Car loans, generally no: a loan used to buy the vehicle and secured by that same vehicle is excluded, the same way a residential mortgage is. The MLA squarely covers payday loans, vehicle-title loans, tax-refund-anticipation loans, deposit-advance products, most installment loans, and open-end consumer credit.
Does MLA protection last for the life of the loan?
No. Your status is tested when you become obligated on the credit or open the account, so credit you took on before covered service is not pulled under the MLA later. And under 32 CFR 232.3(g)(4) a borrower who was covered at origination stops being a covered borrower once they are no longer a covered member or dependent, for example after separating from active duty.
Does it apply to online lenders?
Yes. The disclosure requirement in § 987(c)(1) expressly covers consumer credit originated or extended through the internet.
What disclosures am I owed before signing?
A statement of the annual percentage rate, the disclosures required under the Truth in Lending Act, and a clear description of your payment obligations. The statute requires these orally and in writing, before the credit is issued.
What happens to a loan that breaks the MLA?
Section 987(f)(3) is blunt about it: any credit agreement, promissory note, or other contract prohibited under the section is void from the inception of the contract. A knowing violation is also a misdemeanor under § 987(f)(1), punishable by a fine, up to one year of imprisonment, or both, and the statute preserves every other remedy you would otherwise have, including consequential and punitive damages.
Can a lender make me arbitrate, or sign away my SCRA rights?
No, on both counts. Section 987(f)(4) says no agreement to arbitrate a dispute involving the extension of consumer credit is enforceable against a covered member or dependent, notwithstanding any other federal or state law. And § 987(e)(2) makes it unlawful to extend covered credit that requires the borrower to waive their right to legal recourse under any applicable law, naming the Servicemembers Civil Relief Act specifically.