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What is the Military Lending Act?

Get to know your legal rights under the Military Lending Act (MLA).

The MLA is a federal law that is designed to help protect Service members and their families from predatory lending practices. It provides safeguards when obtaining certain types of consumer credit. Protections under the Act apply to active-duty Service members, Guard and Reservist on active duty for 30 days or more, and covered dependents of protected Service members.

Covered loans under the MLA include:

Sign stating "cash loans on car titles"

  • Payday loans
  • Credit cards
  • Vehicle title loans
  • Refund anticipation loans
  • Certain installment loans
  • Certain student loans

Benefits offered under the MLA include:

  • Interest rate cap: Places limits on the annual percentage rate (APR) on certain loans to 36%. This includes interest, fees, and other charges associated with the loan.
  • Prohibits mandatory arbitration: Prohibits lenders from requiring Service members to submit to arbitration on a dispute related to a covered loan.
  • No prepayment penalties: Prohibits lenders from charging prepayment penalties on covered loans.
  • Accurate disclosures: Lenders must disclose both in writing and verbally all applicable disclosures before extending credit.
  • Identification of Service members: Requires lenders to take reasonable measures to identify whether a consumer is a Service member prior to extending credit.
  • No mandatory allotments: Lenders cannot require Service members to set up paycheck allotment as a requirement to obtain the loan.
  • Protection from waiver of rights: Prohibits Service members from waiving their rights under the law.

The MLA generally doesn’t apply to loans secured by the property being purchased such as residential mortgages, vehicle loans and secured personal property loans like those for home appliances.