The Military Lending Act

The Military Lending Act (MLA) restricts lenders from offering interest rates higher than 36% to active duty service members. It was enacted in 2006 and implemented by the US Department of Defense.

What Rights Are Covered in the Military Lending Act?

The Military Lending Act, or MLA, is a federally enacted law that provides financial protections specifically for active duty service members. These protections include placing caps on interest rates for select loan products. Loans included in the act would be payday loans, online personal installment loans, title loans, and more. 

Because the MLA applies to active duty service members, it includes National Guard and active Reserve duty members. The act also covers direct family members like spouses and dependents.

Several rights are included in the Military Lending Act. Some involve placing caps on interest, specifically a 36% interest cap. This means that all protected under the act cannot be charged higher than a 36% Military APR (Annual Percentage Rate). The act also regulates expenses like finance charges, credit insurance premiums, application fees, and more. 

The acts also cover mandatory waivers of certain legal rights. This means a creditor cannot make it a requirement for active service members to submit to mandatory arbitration.

Another right covered by the MLA makes it so that service members are not subject to prepayment penalties. This means that a creditor or lender cannot charge penalties if the service member pays back the loan early. Many people not protected by the act need to keep fees in mind when they try to pay a loan back early. 

In addition, the MLA covers several specific loans. New consumer loans also comply with the MLA. Loans like payday loans, vehicle title loans, installment loans, and deposit advance loans are all covered under the act. Whether you qualify under the MLA or not, it’s important to research everything you need to know about quick cash loans. 

What Isn’t Covered by the MLA?

The Military Lending Act was meant to have widespread coverage for active-duty members. That said, there are specific loans not covered by the act. 

One example of loans not covered by the act includes residential mortgages. Loans to purchase a home, buy property, or build a house are exempt from this act because it involves ownership of property. Similarly, mortgage refinancing loans are also not covered, as well as home equity loans or lines of credit provided for homes.

Why Was the Military Lending Act Created?

The Military Lending Act was created primarily for active-duty members as a benefit for service. The government created this act to provide extra protection to service members on active duty. If you are actively in the Navy, Army, Marine Corps, Air Force, and Coast Guard, you are covered by the act. 

In addition to the active-duty members, the act is also available for dependents. Direct family dependents such as spouses, children who are minors, and service members on reserve duty are also covered. It’s important to note that children must be younger than 21 years old. Full-time students below the age of 23 are covered as well. That said, if the child is incapacitated in any way, they can be of any age to receive protection under the act.

Eligibility for the Military Lending Act

When it comes to claiming eligibility, the lender in question has the responsibility to determine whether or not a person falls under a specific category protected under the Military Lending Act. This will also affect the personal loan documentation you’ll need. 

First, the lenders must obtain a record of the person’s personal information. An MLA database is available online and maintained by the Department of Defense. This is where this information can be found and confirmed. 

The information must state whether or not the person is on active duty and the length of time they’ve been active for. To open an account with a lender, eligibility must be determined simultaneously. There is a 30-day window in which the lender can establish eligibility. 

Keep in mind that if you are already protected under the MLA, the lender you are working with must provide you with both a written and oral disclosure to make the process official and ensure correct records. 

Resources:

  1. Military Lending Act Know Your Rights
  2. Consumer Compliance Examination Manual Military Lending Act 
  3. Complying Recent Changes Military Lending Act 

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