What are my rights under the Military Lending Act?
Answer: The Military Lending Act (MLA) says that you cant be charged an interest rate higher than 36% on most types of consumer loans and provides other significant rights.
The MLA applies to active-duty servicemembers (including those on active Guard or active Reserve duty) and covered dependents.
Your rights under the MLA include:
- A 36% interest cap. You cant be charged more than a 36% Military Annual Percentage Rate (MAPR), which includes the following costs in calculating your interest rate (with some exceptions):
- Finance charges,
- Credit insurance premiums or fees,
- Add-on products sold in connection with the credit, and
- Other fees like application or participation fees, with some exceptions.
Note: Credit card companies dont have to comply with the MLA until October 3, 2017. Its possible that some of their common fees, like cash advance fees and foreign transaction fees, wont be included in the overall MAPR calculation.
- No mandatory waivers of consumer protection laws. A creditor cant 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 cant require you to create a voluntary military allotment in order to get the loan. An allotment is an automatic amount of money taken from your paycheck to pay back your loan.
- No prepayment penalty. A creditor cant charge a penalty if you pay back part or all of the loan early.