Military Lending Act: Provisions and Limitations

MLA 2006/2007:

Annual Percentage Rate:

Based on the MLA definition of consumer credit, the creditor cannot issue a military member a loan with an interest rate that exceeds 36%.

"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."

Those Covered by MLA:

The Military Lending Act only covers individuals who are actively serving in the Armed Forces, Active Guard and Reserve duty, or is a dependent/spouse of a military member.

"The term 'covered member' means a member of the armed forces who is serving on– (i) Active duty pursuant to title 10, title 14, or title 32, United States Code, under a call or order that does not specify a period of 30 days or fewer; or (ii) Active Guard and Reserve duty, as that term is defined in 10 U.S.C. 101(d(6). (3) The term 'dependent' with respect to a covered member means a person described in subparagraph (A)."


Creditors must offer financial products that do not allow rollover, refinancing, or consolidation unless the refinance product has more favorable terms than the original debt. Plus, there's a ban which prevents creditors from encouraging the covered member to sign away their rights. Below is the full list of creditor 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; (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."

Consumer Credit Definition

Before the 'Final Rule' amendment, the Military Lending Act defined only three types of consumer credit. The original three types include payday loans, vehicle title loans, and tax refund anticipation loans. By law, these consumer creditors must adhere to the MLA regulations and limitations when issuing loans to military personnel.

"…define the scope of 'consumer credit' as a narrow band of products within three categories of credit; for example, the existing rule had defined a 'payday loan,' in relevant part, as '[c]losed-end credit with a term of 91 days or fewer in which the amount financed does not exceed $2,000.'"

Family Financial Support

A special financial support program that offers grants, no interest loans, and other free products was created to serve military members and their families who find themselves in financial trouble.

"To provide monetary support to Service members and their families with financial hardships, the military services have partnered with nonprofit charitable organizations chartered to provide relief services to Service members and their families. The four Relief Societies provide no-interest loans, grants, and scholarships, and fund other support programs for active-duty military communities."

Date of Implementation

The Military Lending Act of 2006 and it's 2007 amendments became law on October 1, 2007.

"...shall take effect on October 1, 2007, or on such earlier date as may be prescribed by the Secretary of Defense, and shall apply with respect to extensions of consumer credit on or after such effective date"

MLA 2013

National Defense Authorization Act for Fiscal Year 2013 ("2013 Act") MLA Amendment

Extending Covered Borrowers Legal Rights

Under this amendment, covered borrowers are now allowed to sue for damages against any lender who does not follow the MLA.

"The 2013 Act added provisions that would permit a covered borrower to recover damages from a creditor who violates a requirement of the MLA, [23] and authorizes the agencies "specified in section 108 of the Truth in Lending Act" ["TILA"] to enforce the requirements of the MLA "in the manner set forth in that section [of TILA] or under any other applicable authorities available to such agencies by law.""

Mandatory MLA Review

The Department of Defense must review the MLA a minimum of once every two years. The DoD ensures that consumer creditors aren't circumventing the MLA law by way of a technicality.

"The 2013 Act amended the MLA to require the Department to consult–"not less often than once every two years"–with the Federal Agencies with a view towards revising the regulation implementing the MLA."

To understand all your rights covered under the MLA, review the complete act, which is available online and is free to access:

Military Lending Act
Military Lender