Servicemembers: What are your rights under the Military Lending Act (MLA)?
The Federal law provides special protections for active-duty servicemembers, including those on active Guard duty or active Reserve duty, their spouses, and certain dependents.
These protections, known as the Military Lending Act (MLA), cap interest rates on many types of loans, according to the Consumer Financial Protection Bureau.
What is MLA?
This act limits the interest rates that may be charged no more than a 36% MAPR (Military Annual Percentage Rate).
When calculating the interest rate, costs such as finance charges, credit insurance premiums, application fees, or fees for debt cancellation contracts, with some exceptions, fall under MLA.
The act also prevents lenders from requiring you to submit to mandatory arbitration or give up certain rights that you have under State or Federal laws.
Also, a creditor cannot make you create a voluntary military allotment in order to get the loan.
There is also a no prepayment penalty clause in the act so if you pay the loan off early, the creditor cannot charge you a fee for paying off the debt ahead of schedule.
The types of loans that are generally covered by the MLA are Payday loans, deposit advance products, refund anticipation loans and vehicle title loans, overdraft lines of credit, and certain types of student loans
What is not covered under MLA?
There are some loans that are not covered under MLA, for example:
- A credit that is secured by the property being purchased and certain other secured loans
- Residential mortgages
- When financing to buy or build a home that is secured by the home, mortgage refinances, home equity loans, lines of credit, or reverse mortgages.
- A motor vehicle loan, when the credit is secured by the motor vehicle you are buying.
- A loan to buy personal property when the credit is secured by the property you are buying such as a home appliance.
If you are considering taking out a loan, and you want to learn more on how the Military Lending Act (MLA) can affect you, contact your local Judge Advocate General’s (JAG) office.
They can assist you in understanding the lending restrictions and your rights as a servicemember.
You can also ask your Installation Financial Readiness Office for information as well.
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