Who Qualifies For the Military Lending Act?

The Military Lending Act (MLA) is a federal law designed to safeguard active duty service members and their dependents from predatory lending practices. It establishes important regulations for various credit products, including payday loans, vehicle title loans, installment loans, and more. Understanding who qualifies for the protections offered by the MLA is crucial for service members to navigate their financial decisions.

If you are an active duty service member or their dependent and want to understand how the Military Lending Act can protect you from predatory lending practices, contact our consumer protection attorneys today. We offer a free consultation to evaluate your case and provide expert guidance on your rights under the MLA.

Don’t wait; schedule your consultation now and secure your financial well-being by calling 816-281-0649 today.

Military Lending Act Overview

The Military Lending Act is a federal law enacted to protect active duty service members from exploitative lending practices. It applies to various credit transactions, including loans, lines of credit, and other financial products. By imposing restrictions on interest rates, fees, and certain lending practices, the MLA aims to shield service members from financial harm.

Covered Borrowers

The MLA safeguards active duty service members, including members of the Army, Navy, Air Force, Marines, Coast Guard, and their dependents. Eligibility for MLA protections extends to National Guard members and Reservists on active duty, serving under Title 10 orders for a period of more than 30 days.

Covered Credit Products

The MLA’s protective measures encompass a range of credit products that service members may encounter. These include payday loans, vehicle title loans, traditional overdraft services, installment loans, pawn loans, and tax refund anticipation loans.

It also includes certain lending practices associated with credit cards, residential mortgages, home equity loans, and other consumer loans that fall under the MLA’s purview.

MLA Safeguards and Restrictions

The Military Lending Act imposes several safeguards and restrictions to prevent exploitative lending practices and promote fair treatment for service members. These include:

• Interest Rate Cap – The MLA caps the Military Annual Percentage Rate (MAPR) at 36% for covered borrowers. This rate includes not only interest charges but also fees, credit insurance premiums, and other finance charges.
• Mandatory Arbitration Clauses – The MLA prohibits the use of mandatory arbitration clauses in most consumer credit contracts. This ensures that service members have the right to pursue legal action in case of disputes.
• Loan Rollovers and Payment Obligations – Lenders are prohibited from rolling over loans to extend credit to a covered borrower without their explicit request. The MLA also restricts the lender’s ability to take automatic payment from a service member’s account without a written agreement.
• Prepayment Penalties – The MLA disallows prepayment penalties on loans, allowing service members to pay off their debts early without incurring additional charges.

Exceptions to the MLA

While the MLA covers a wide range of credit products, certain lending practices and credit transactions fall outside its scope. For example, certain installment loans expressly intended for the purchase of personal property may be exempt from MLA protections. It’s essential for service members to carefully review their loan terms and understand the applicable laws to ensure their rights are protected.

Additional Protections for Service Members

In addition to the robust safeguards offered by the Military Lending Act (MLA), service members can find further support and protections under the Servicemembers Civil Relief Act (SCRA). The SCRA is another essential federal law designed to shield active duty service members and their families from financial hardships while they are serving our country.

Let’s explore the additional safeguards provided by the SCRA:

• Capping of Interest Rates – Similar to the MLA, the SCRA places a limit on the interest rates that can be charged on certain financial obligations incurred before entering active duty. Under the SCRA, interest rates on these obligations, including credit card debt, mortgages, and student loans, are capped at 6% during the period of military service. This provision helps service members manage their existing debts and prevents exorbitant interest charges from accumulating.
• Protection Against Lease Terminations – The SCRA safeguards service members’ rights when it comes to residential leases. If a service member enters active duty after signing a lease, the SCRA provides protection against lease terminations. It ensures that service members and their dependents cannot be evicted from their rental properties without a court order, providing stability and security for their families while they fulfill their military duties.
• Stay of Legal Proceedings – Under the SCRA, service members may request a temporary stay or postponement of certain civil proceedings, including foreclosures, bankruptcy proceedings, and divorce proceedings. This provision acknowledges that military service can often lead to unexpected disruptions in personal affairs, and it aims to prevent service members from being adversely affected while they are fulfilling their duty to the nation.
• Protection from Default Judgments – The SCRA offers protection against default judgments, which can occur when a service member fails to respond to a legal action or fails to appear in court due to their military service obligations. This provision ensures that service members have the opportunity to defend their rights in legal proceedings by allowing them to request a stay of proceedings or to have default judgments set aside upon their return from active duty.
• Termination of Certain Contracts – The SCRA grants service members the right to terminate certain contracts, such as automobile leases or cell phone service contracts, if they receive military orders for a permanent change of station or deployment for a period exceeding 90 days. This provision recognizes the unique challenges faced by service members and their need for flexibility when their military obligations require relocation or deployment.

It’s important to note that the SCRA and MLA work in tandem to provide comprehensive protections for service members. Understanding both laws and their respective provisions is crucial for service members and their families to navigate the complexities of consumer and financial matters during their military service.

Who Qualifies For Military Lending Act, FAQ