Written by Christopher Dunne, Coast Guard Legal Assistance Program
What is the Military Lending Act?
The Military Lending Act (MLA) is a federal law enacted in 2006 to protect servicemembers and their covered dependents from excessively high interest rates on certain consumer agreements. The maximum interest rate a creditor may charge for these transactions is 36%, including most premiums and associated fees. Originally these protections only applied to payday loans, vehicle title loans, and refund anticipation loans.
What has changed about the MLA?
New Department of Defense rules greatly expand coverage of the 36% interest rate well beyond the few original categories. Under the new rules, which took effect Oct. 3, 2016, the types of protected transactions are expanded to include protections for credit offered for personal, family or household use that is subject to a finance charge or put into a written agreement that is payable in more than four installments. There are still some exceptions, such as residential mortgages, and implementation of this rule will not apply to credit cards until at least Oct. 3, 2017.
Does the MLA provide other protections?
Creditors may not require borrowers to do any of the following: waive rights to recourse under any State or Federal law (including the Servicemembers Civil Relief Act), submit to mandatory arbitration, establish an allotment for repayment, or pay a penalty for prepaying any part of the loan. Enforcement provisions include criminal and civil penalties and the right to privately sue for violations of the MLA. The MLA also requires creditors to provide a notice of the protections of the law to borrowers and a clear description of the payment obligation.
Who should I ask if I have questions about the MLA?
Coast Guard legal assistance attorneys are available to answer questions about any of your consumer contracts. Click here to find the attorney nearest to you.