Military Lending Act statute
10 U.S.C. § 987: The Military Lending Act 36% Cap, Full Text
Official heading: §987. Terms of consumer credit extended to members and dependents: limitations
In one line
The Military Lending Act itself: a 36% cap on the annual rate for consumer credit to covered members and their dependents, required disclosures, banned loan terms, and the remedies when a creditor breaks the rules.
- No annual percentage rate above 36 percent on consumer credit to a covered member or dependent (subsection (b))
- A contract the section prohibits is void from its inception (subsection (f)(3))
- Actual damages of not less than $500 per violation, plus punitive damages and attorney fees (subsection (f)(5))
Text checked October 10, 2026
What 10 U.S.C. § 987 does to your money
Section 987 is the statute; 32 CFR part 232 is the Defense Department rule that implements it, and most of the detail you will use lives in the rule. The statute sets the frame. A creditor extending consumer credit to a covered member or dependent may charge interest only as the agreement allows, as state or federal law authorizes, and as the section does not prohibit, and never at an annual percentage rate above 36 percent. The rule turns that into the Military Annual Percentage Rate, which counts credit insurance, debt cancellation fees and add-on products the ordinary APR leaves out.
Subsection (e) bans seven loan terms outright: rolling over or refinancing a creditor’s own loan with new credit, forcing you to waive legal rights including the SCRA, mandatory arbitration or onerous notice rules, unreasonable notice before you can sue, using a check, bank-account access or a car title as security, requiring an allotment to repay, and prepayment penalties. The rule narrows two of them (the rollover and car-title bans reach payday-type and other non-bank lenders), so read § 232.8 before assuming a term is illegal.
The remedies are why the Act has teeth. A prohibited contract is void from the start, an arbitration clause cannot be enforced against a covered member or dependent, and a borrower can recover actual damages of at least $500 per violation, punitive damages and attorney fees. The deadline is two years after you discover the violation or five years after it happened, whichever comes first. States may not let lenders charge members more than the legal limit for residents, or waive state protections because a borrower is a nonresident or in the military.
Guides on this site that apply 10 U.S.C. § 987
- Armed Forces Loans of Nevada Is Not Accepting New Applications
Its application page says it is not accepting new applications (read October 9, 2026). For borrowers: MAPR 9.95% to 35.95%, how to pay, and 0% options.
- 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.
- 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.
- 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.
- 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.
- 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.
- Omni Financial Military Loans: Phone, Rates, and the 2020 CFPB Order
Omni lends $500 to $10,000 over 6 to 36 months at up to 36% MAPR, treats every borrower as MLA-covered, and was ordered to pay a $2.175M CFPB penalty in 2020.
- Pioneer Military Loans: $500 to $10,000 via Lead Bank, No APR Posted
Pioneer Services is now Pioneer Military Credit: Lead Bank loans of $500 to $10,000 over 6 to 36 months. No rate is posted, so 36% MAPR is your ceiling.
- AER Loan: 0% Interest, No Late Fees, $2,000 Your 1SG Can Approve
Army Emergency Relief lends at 0% with no late fees. Who qualifies, the $2,000 Quick Assist a commander or 1SG approves, allotment repayment, how to apply.
- AFAS Falcon Loan: $1,500 at 0%, Folded Into One Application in 2025
The Falcon Loan was AFAS's $1,000, then $1,500, no-interest emergency loan. Since June 1, 2025 it is one application. Terms, repayment math, if AFAS says no.
- How to Get Out of a Payday or Title Loan as a Servicemember
Two federal laws plus interest-free aid end a predatory payday or title loan. The SCRA cap, the MLA ceiling, honest alternatives, and how to escalate a stall.
- Military Allotments Explained: Discretionary vs Not
How military allotments work: discretionary vs non-discretionary, the six-allotment cap, and the predatory-allotment trap the MLA and DoD shut down.
The full text of 10 U.S.C. § 987
From the United States Code, 2024 Edition, current through January 6, 2025, as published on GovInfo (official source, retrieved October 10, 2026). House style: em dashes in the official text are shown as colons or periods; no word is changed.
(a) Interest. A creditor who extends consumer credit to a covered member of the armed forces or a dependent of such a member shall not require the member or dependent to pay interest with respect to the extension of such credit, except as:
(1) agreed to under the terms of the credit agreement or promissory note;
(2) authorized by applicable State or Federal law; and
(3) not specifically prohibited by this section.
(b) Annual Percentage Rate. A creditor described in subsection (a) may not impose an annual percentage rate of interest greater than 36 percent with respect to the consumer credit extended to a covered member or a dependent of a covered member.
(c) Mandatory Loan Disclosures.
(1) Information required. With respect to any extension of consumer credit (including any consumer credit originated or extended through the internet) to a covered member or a dependent of a covered member, a creditor shall provide to the member or dependent the following information orally and in writing before the issuance of the credit:
(A) A statement of the annual percentage rate of interest applicable to the extension of credit.
(B) Any disclosures required under the Truth in Lending Act (15 U.S.C. 1601 et seq.).
(C) A clear description of the payment obligations of the member or dependent, as applicable.
(2) Terms. Such disclosures shall be presented in accordance with terms prescribed by the regulations issued by the Board of Governors of the Federal Reserve System to implement the Truth in Lending Act (15 U.S.C. 1601 et seq.).
(d) Preemption.
(1) Inconsistent laws. Except as provided in subsection (f)(2), this section preempts any State or Federal law, rule, or regulation, including any State usury law, to the extent that such law, rule, or regulation is inconsistent with this section, except that this section shall not preempt any such law, rule, or regulation that provides protection to a covered member or a dependent of such a member in addition to the protection provided by this section.
(2) Different treatment under state law of members and dependents prohibited. States shall not:
(A) authorize creditors to charge covered members and their dependents annual percentage rates of interest for any consumer credit or loans higher than the legal limit for residents of the State; or
(B) permit violation or waiver of any State consumer lending protections covering consumer credit for the benefit of residents of the State on the basis of nonresident or military status of a covered member or dependent of such a member, regardless of the member's or dependent's domicile or permanent home of record.
(e) Limitations. It shall be unlawful for any creditor to extend consumer credit to a covered member or a dependent of such a member with respect to which:
(1) the creditor rolls over, renews, repays, refinances, or consolidates any consumer credit extended to the borrower by the same creditor with the proceeds of other credit extended to the same covered member or a dependent;
(2) the borrower is required to waive the borrower's right to legal recourse under any otherwise applicable provision of State or Federal law, including any provision of the Servicemembers Civil Relief Act (50 U.S.C. 3901 et seq.);
(3) the creditor requires the borrower to submit to arbitration or imposes onerous legal notice provisions in the case of a dispute;
(4) the creditor demands unreasonable notice from the borrower as a condition for legal action;
(5) the creditor uses a check or other method of access to a deposit, savings, or other financial account maintained by the borrower, or the title of a vehicle as security for the obligation;
(6) the creditor requires as a condition for the extension of credit that the borrower establish an allotment to repay an obligation; or
(7) the borrower is prohibited from prepaying the loan or is charged a penalty or fee for prepaying all or part of the loan.
(f) Penalties and Remedies.
(1) Misdemeanor. A creditor who knowingly violates this section shall be fined as provided in title 18, or imprisoned for not more than one year, or both.
(2) Preservation of other remedies. The remedies and rights provided under this section are in addition to and do not preclude any remedy otherwise available under law to the person claiming relief under this section, including any award for consequential and punitive damages.
(3) Contract void. Any credit agreement, promissory note, or other contract prohibited under this section is void from the inception of such contract.
(4) Arbitration. Notwithstanding section 2 of title 9, or any other Federal or State law, rule, or regulation, no agreement to arbitrate any dispute involving the extension of consumer credit shall be enforceable against any covered member or dependent of such a member, or any person who was a covered member or dependent of that member when the agreement was made.
(5) Civil liability.
(A) In general. A person who violates this section with respect to any person is civilly liable to such person for:
(i) any actual damage sustained as a result, but not less than $500 for each violation;
(ii) appropriate punitive damages;
(iii) appropriate equitable or declaratory relief; and
(iv) any other relief provided by law.
(B) Costs of the action. In any successful action to enforce the civil liability described in subparagraph (A), the person who violated this section is also liable for the costs of the action, together with reasonable attorney fees as determined by the court.
(C) Effect of finding of bad faith and harassment. In any successful action by a defendant under this section, if the court finds the action was brought in bad faith and for the purpose of harassment, the plaintiff is liable for the attorney fees of the defendant as determined by the court to be reasonable in relation to the work expended and costs incurred.
(D) Defenses. A person may not be held liable for civil liability under this paragraph if the person shows by a preponderance of evidence that the violation was not intentional and resulted from a bona fide error notwithstanding the maintenance of procedures reasonably adapted to avoid any such error. Examples of a bona fide error include clerical, calculation, computer malfunction and programming, and printing errors, except that an error of legal judgment with respect to a person's obligations under this section is not a bona fide error.
(E) Jurisdiction, venue, and statute of limitations. An action for civil liability under this paragraph may be brought in any appropriate United States district court, without regard to the amount in controversy, or in any other court of competent jurisdiction, not later than the earlier of:
(i) two years after the date of discovery by the plaintiff of the violation that is the basis for such liability; or
(ii) five years after the date on which the violation that is the basis for such liability occurs.
(6) Administrative enforcement. The provisions of this section (other than paragraph (1) of this subsection) shall be enforced by the agencies specified in section 108 of the Truth in Lending Act (15 U.S.C. 1607) in the manner set forth in that section or under any other applicable authorities available to such agencies by law.
(g) Servicemembers Civil Relief Act Protections Unaffected. Nothing in this section may be construed to limit or otherwise affect the applicability of section 207 of the Servicemembers Civil Relief Act (50 U.S.C. 3937).
(h) Regulations. (1) The Secretary of Defense shall prescribe regulations to carry out this section.
(2) Such regulations shall establish the following:
(A) Disclosures required of any creditor that extends consumer credit to a covered member or dependent of such a member.
(B) The method for calculating the applicable annual percentage rate of interest on such obligations, in accordance with the limit established under this section.
(C) A maximum allowable amount of all fees, and the types of fees, associated with any such extension of credit, to be expressed and disclosed to the borrower as a total amount and as a percentage of the principal amount of the obligation, at the time at which the transaction is entered into.
(D) Definitions of "creditor" under paragraph (5) and "consumer credit" under paragraph (6) of subsection (i), consistent with the provisions of this section.
(E) Such other criteria or limitations as the Secretary of Defense determines appropriate, consistent with the provisions of this section.
(3) In prescribing regulations under this subsection, and not less often than once every two years thereafter, the Secretary of Defense shall consult with the following:
(A) The Federal Trade Commission.
(B) The Board of Governors of the Federal Reserve System.
(C) The Office of the Comptroller of the Currency.
(D) The Federal Deposit Insurance Corporation.
(E) The Bureau of Consumer Financial Protection.
(F) The National Credit Union Administration.
(G) The Treasury Department.
(i) Definitions. In this section:
(1) Covered member. The term "covered member" means a member of the armed forces who is:
(A) on active duty under a call or order that does not specify a period of 30 days or less; or
(B) on active Guard and Reserve Duty.
(2) Dependent. The term "dependent", with respect to a covered member, means a person described in subparagraph (A), (D), (E), or (I) of section 1072(2) of this title.
(3) Interest. The term "interest" includes all cost elements associated with the extension of credit, including fees, service charges, renewal charges, credit insurance premiums, any ancillary product sold with any extension of credit to a servicemember or the servicemember's dependent, as applicable, and any other charge or premium with respect to the extension of consumer credit.
(4) Annual percentage rate. The term "annual percentage rate" has the same meaning as in section 107 of the Truth and Lending Act (15 U.S.C. 1606), as implemented by regulations of the Board of Governors of the Federal Reserve System. For purposes of this section, such term includes all fees and charges, including charges and fees for single premium credit insurance and other ancillary products sold in connection with the credit transaction, and such fees and charges shall be included in the calculation of the annual percentage rate.
(5) Creditor. The term "creditor" means a person:
(A) who:
(i) is engaged in the business of extending consumer credit; and
(ii) meets such additional criteria as are specified for such purpose in regulations prescribed under this section; or
(B) who is an assignee of a person described in subparagraph (A) with respect to any consumer credit extended.
(6) Consumer credit. The term "consumer credit" has the meaning provided for such term in regulations prescribed under this section, except that such term does not include (A) a residential mortgage, or (B) a loan procured in the course of purchasing a car or other personal property, when that loan is offered for the express purpose of financing the purchase and is secured by the car or personal property procured.
Source: (Added Pub. L. 109-364, div. A, title VI, §670(a), Oct. 17, 2006, 120 Stat. 2266; amended Pub. L. 112-239, div. A, title VI, §§661(a), (b), 662(a), (b), 663, Jan. 2, 2013, 126 Stat. 1785, 1786; Pub. L. 114-328, div. A, title X, §1081(b)(2)(A), Dec. 23, 2016, 130 Stat. 2418.)
What changed, and when
- 2016: Subsec. (e)(2). Pub. L. 114-328, §1081(b)(2)(A)(i), inserted "(50 U.S.C. 3901 et seq.)" before semicolon at end. Subsec. (g). Pub. L. 114-328, §1081(b)(2)(A)(ii), substituted "(50 U.S.C. 3937)" for "(50 U.S.C. App. 527)".
- 2013: Subsec. (d)(2)(A). Pub. L. 112-239, §661(a)(1), inserted "any consumer credit or" before "loans". Subsec. (d)(2)(B). Pub. L. 112-239, §661(a)(2), inserted "covering consumer credit" after "State consumer lending protections". Subsec. (f)(5), (6). Pub. L. 112-239, §662(a), (b), added pars. (5) and (6). Subsec. (h)(3). Pub. L. 112-239, §661(b)(1), inserted "and not less often than once every two years thereafter," after "under this subsection," in introductory provisions. Subsec. (h)(3)(E). Pub. L. 112-239, §661(b)(2), added subpar. (E) and struck out former subpar. (E) which read as follows: "The Office of Thrift Supervision." Subsec. (i)(2). Pub. L. 112-239, §663, amended par. (2) generally. Prior to amendment, par. (2) defined the term "dependent".
Every MLA guide on this site is on the Military Lending Act hub; the SCRA, which covers debt from before active duty, is on its own section-by-section index.
Heads up: SCRA Saver publishes general information, not legal or financial advice. Laws change and every situation differs. Confirm details with your installation legal assistance office (free for service members) or a licensed professional.