What is the Military Lending Act (2006) (US)?

Introduction

The Military Lending Act (MLA), 10 U.S. Code § 987, is a Federal law that provides special protections for active duty servicemembers such as capping interest rates on many loan products.

It was enacted in 2006.

A detailed account of the MLA, including provisions and limitations, can be found on the Federal Reserve website here (PDF file).

Refer to Servicemembers Civil Relief Act (2003), Military Spouses Residency Relief Act (2009), and Veterans Benefits and Transition Act (2018).

Purpose

Servicemembers: Extends important safeguards to Servicemembers on active duty status and their dependents in the area of financial management and consumer credit.
Financial Service Providers: Aids them to verify if an individual is eligible for the provisions of MLA.

Outline

The MLA provides servicemembers on active duty (and their dependents) with important safeguards in the area of pay day loans, vehicle title loans, refund anticipation loans, military instalment loans, rent-to-own, and other forms of consumer credit (credit cards beginning 03 October 2017).

The MLA website helps servicemembers and their dependents verify whether they or their military sponsor is serving on active duty and is therefore eligible for the protections of the MLA.

Website

The MLA website enables you to verify whether an individual or their military sponsor is currently serving on active duty in the US military.

On the website, users may submit a Single Record Request to obtain a report certifying Title 10 active duty status for provisions under MLA. An account is required to use the Single Record Request.

Users may also request Multiple Record Requests of multiple individuals (or multiple dates for a single individual) to determine Title 10 active duty status for provisions under MLA.

The official MLA website can be found here.

What is a MLA Certificate?

A certificate is a document used as apparent evidence of an individual’s Active Duty status in the US Military, Reserve, or Guard.

This certificate is also called the “Status Report Pursuant to Military Lending Act”.

Eligibility Criteria

The MLA website enables financial service providers to input identifying information and determine if the individual, either a sponsor or dependent, is eligible based on meeting one of the following criteria:

Is on active duty.
Regular or reserve member of the Army, Navy, Marine Corps, Air Force, or Coast Guard, serving on active duty under a call or order that does not specify a period of 30 days or less, or such a member serving on Active Guard and Reserve duty as that term is defined in 10 U.S.C. 101(d)(6).
The member’s spouse.
The member’s child defined in 38 USC 101(4).
An individual for whom the member provided more than one-half of the individual’s support for 180 days immediately preceding an extension of consumer credit covered by 32 C.F.R. Part 232.

You are covered if you and your family members are enrolled in DEERS (see below) and meet the above criteria.

DEERS Database

The Department of Defence (DoD) strongly supports the enforcement of the MLA. Information provided is in support of Title 10 and a part of Title 14 for Army, Navy, Marine Corps, Air Force, and Coast Guard.

The data is extracted from DMDC’s Defence Eligibility and Enrolment Reporting System (DEERS) database, which is the official source of data regarding eligibility for uniformed services medical care and other benefits and entitlements.

Title 10: Outlines the role of Armed Forces and the legal basis for the roles, missions and organisation of each of the services as well as the United States Department of Defence.
Title 14: Outlines the role of the United States Coast Guard.
Title 32: Outlines the role of the United States National Guard which is established under Title 32, but members are frequently activated to support the DoD, in which case their orders are covered under Title 10.

What Rights Do You have Under MLA?

The MLA applies to active duty servicemembers (including those on active Guard or active Reserve duty), spouses, and certain dependents. It limits the interest rates that may be charged on many types of consumer loans to no more than 36% and provides other important protections.

Your rights under the MLA include:

A 36% interest cap: You can not be charged more than a 36% Military Annual Percentage Rate (MAPR), which includes costs like the following in calculating your interest rate (with some exceptions):
- Finance charges.
- Credit insurance premiums.
- Add-on credit-related products sold in connection with the credit.
- Fees like application fees, participation fees, or fees for debt cancellation contracts, with some exceptions.
No mandatory waivers of certain legal rights: A creditor can not require you to submit to mandatory arbitration or give up certain rights you have under State or Federal laws like the Servicemembers Civil Relief Act.
No mandatory allotments: A creditor can not require you to create a voluntary military allotment in order to get the loan.
No prepayment penalty: A creditor can not charge a penalty if you pay back part – or all – of the loan early.

What Types of Loans ARE NOW Covered under the MLA?

In 2015, the DoD expanded by rule the types of credit products that are covered by the MLA. In general, the consumer credit products now covered when offered to active-duty servicemembers and their covered dependents include, but are not limited to:

Payday loans, deposit advance products, tax refund anticipation loans, and vehicle title loans;
Overdraft lines of credit but not traditional overdraft services;
Instalment loans but not instalment loans expressly intended to finance the purchase of a vehicle or personal property when the credit is secured by the vehicle or personal property being purchased;
Certain student loans; and
Credit cards (Creditors did not have to comply with DoD’s new rule until 03 October 2017).

What Types of Loans are NOT covered under the MLA?

There are some loans the MLA does not cover. Generally, this is credit that is secured by the property being purchased and certain other secured loans. These loans generally include:

Residential mortgages (any credit transaction secured by an interest in a dwelling), including financing to buy or build a home that is secured by the home, mortgage refinances, home equity loans or lines of credit (HELOC), or reverse mortgages;
A loan to buy a motor vehicle when the credit is secured by the motor vehicle you are buying; and
A loan to buy personal property when the credit is secured by the property you are buying, like a home appliance.

What if a Loan DOES NOT COMPLY with the MLA, Can a Creditor not give me the Loan because I am an Active Duty Servicemember?

Generally, yes.

If the loan exceeds the 36% interest cap or if the loan violates other provisions of the MLA, creditors that give you the loan could be subject to penalties under the MLA.