Military Lending Act regulation
32 CFR 232.9: MLA Penalties, Void Contracts and $500 Damages
Official heading: § 232.9 Penalties and remedies.
In one line
Sets the consequences: a knowing violation is a crime, a noncompliant contract is void from inception, arbitration agreements cannot be enforced, and a borrower can sue for damages, punitive damages and attorney fees.
- Actual damages, not less than $500 for each violation
- Contract void from inception if it fails to comply or contains a prohibited term
- Sue within 2 years of discovering the violation, and no later than 5 years after it occurred
Text checked October 10, 2026
What 32 CFR 232.9 does to your money
Section 232.9 is where the MLA becomes money. A credit agreement that fails to comply with the Act as implemented by the rule, or that contains even one prohibited term, is void from the inception of the contract. An arbitration agreement over consumer credit to a covered borrower cannot be enforced against that borrower, or against anyone who was a covered borrower when they signed it.
A borrower can recover actual damages of not less than $500 for each violation, plus appropriate punitive damages, equitable relief and attorney fees. The deadline is the earlier of two years after you discover the violation or five years after it occurred, so an old high-cost loan you are still paying may be within reach. A creditor escapes liability only by proving an unintentional bona fide error, such as a clerical or programming mistake, despite reasonable procedures; a mistake about what the law requires does not count.
These remedies stack on top of others, consequential and punitive damages under state law included. A knowing violation is also a federal crime punishable by a fine and up to one year in prison. A borrower who sues in bad faith to harass a lender can be made to pay the lender’s attorney fees, so bring the paperwork, not just the suspicion.
Guides on this site that apply 32 CFR 232.9
- 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.
The full text of 32 CFR 232.9
From the eCFR, current through October 7, 2026; this section was last amended December 5, 2016 (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) Misdemeanor. A creditor who knowingly violates 10 U.S.C. 987 as implemented by this part shall be fined as provided in title 18, United States Code, or imprisoned for not more than one year, or both.
(b) Preservation of other remedies. The remedies and rights provided under 10 U.S.C. 987 as implemented by this part are in addition to and do not preclude any remedy otherwise available under State or Federal law or regulation to the person claiming relief under the statute, including any award for consequential damages and punitive damages.
(c) Contract void. Any credit agreement, promissory note, or other contract with a covered borrower that fails to comply with 10 U.S.C. 987 as implemented by this part or which contains one or more provisions prohibited under 10 U.S.C. 987 as implemented by this part is void from the inception of the contract.
(d) Arbitration. Notwithstanding 9 U.S.C. 2, or any other Federal or State law, rule, or regulation, no agreement to arbitrate any dispute involving the extension of consumer credit to a covered borrower pursuant to this part shall be enforceable against any covered borrower, or any person who was a covered borrower when the agreement was made.
(e) Civil liability: (1) In general. A person who violates 10 U.S.C. 987 as implemented by this part 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.
(2) Costs of the action. In any successful action to enforce the civil liability described in paragraph (e)(1) of this section, the person who violated 10 U.S.C. 987 as implemented by this part is also liable for the costs of the action, together with reasonable attorney fees as determined by the court.
(3) 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.
(4) Defenses. A person may not be held liable for civil liability under paragraph (e) of this section 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 10 U.S.C. 987 as implemented by this part is not a bona fide error.
(5) Jurisdiction, venue, and statute of limitations. An action for civil liability under paragraph (e) of this section 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.
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.