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.
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
Start here
- You want the basics first: What the Military Lending Act is
- 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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What Is the Military Lending Act? The 36% MAPR Cap
The Military Lending Act caps most credit taken during service at a 36% MAPR under 10 USC 987. Who and what it covers, and how it differs from the SCRA.
Caps new credit at 36% all-in
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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.
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.