What the Military Lending Act does
The Military Lending Act (MLA) is a federal law that limits the cost of consumer credit for people serving on active duty and for their covered dependents. Its best-known rule is simple: the Military Annual Percentage Rate (MAPR) on covered credit cannot be higher than 36%.
That number matters because many small-dollar products cost far more. The Consumer Financial Protection Bureau (CFPB) notes that a typical two-week payday loan with a fee of $15 per $100 works out to an APR of almost 400%. For a covered borrower, credit priced like that is not allowed.
The MLA sits on top of other protections. It does not replace the Truth in Lending Act, which requires lenders to disclose an APR to every borrower, and it doesn’t replace the Servicemembers Civil Relief Act. A lender can’t ask you to waive those rights as a condition of a loan.
Who is covered
According to the CFPB, the MLA applies to active-duty servicemembers, including members of the National Guard or Reserve who are on active duty, and to their covered dependents, such as a spouse or certain children.
Coverage is tied to active-duty status at the time the credit is extended. If you’re not sure whether you or a family member qualifies, your installation’s legal assistance office (JAG) or financial readiness office can check your situation for free. Lenders also have ways to confirm covered status before they make a loan.
Not on active duty? Veterans and members of the Guard or Reserve who aren’t on active duty aren’t covered by the MLA cap, but state rate limits and the Truth in Lending Act still apply. See our guide to personal loan rates for what typical offers look like.
Which kinds of credit are covered
The MLA reaches most of the products servicemembers are likely to be offered for small, short-term needs. According to the CFPB, covered credit includes:
- Payday loans, deposit advance products and vehicle title loans.
- Installment loans, with the exceptions below.
- Overdraft lines of credit, though not traditional overdraft services.
- Credit cards. Card issuers have had to comply since October 3, 2017.
Some credit is excluded because it is secured by the thing you are buying. That includes residential mortgages, mortgage refinances, home equity loans and lines of credit, reverse mortgages, auto loans secured by the vehicle you are buying, and loans secured by personal property you are buying, such as jewelry or an appliance.
What counts toward the 36% MAPR
The MAPR is broader than a regular APR. The CFPB says it includes:
- Finance charges, such as interest.
- Credit insurance premiums or fees sold with the loan.
- Add-on products sold in connection with the credit, such as debt-cancellation plans.
- Other fees, such as application or participation fees, with some exceptions.
Because add-ons count, a lender can’t keep the stated interest rate under 36% and then push the real cost above the cap with a bundle of extra charges.
What 36% looks like in dollars
On a $1,000 loan repaid in 12 equal monthly payments, a 36% rate costs about $100.46 a month, or $205.55 in total interest. A payday loan of $500 at $15 per $100, renewed every two weeks for six months, would cost $975 in fees and still leave the $500 owed.
| Loan | Amount | Term | Cost |
|---|---|---|---|
| Installment loan at 36% (MLA ceiling) | $1,000 | 12 months | $205.55 interest |
| Installment loan at 35.99% | $1,000 | 12 months | $205.49 interest |
| Payday loan, $15 per $100, renewed 13 times | $500 | 26 weeks | $975 in fees |
Figures assume fixed payments made on time. Calculated by Riverstone.
Your other rights under the MLA
The rate cap is only part of the law. The CFPB lists these protections for covered borrowers:
- No mandatory arbitration. A creditor can’t require you to settle disputes through arbitration.
- No waiver of your rights. You can’t be required to give up certain federal or state legal protections, such as those under the Servicemembers Civil Relief Act.
- No required military allotment. A lender can’t make a voluntary allotment from your pay a condition of the loan.
- No prepayment penalty. You can pay off part or all of the loan early without a penalty.
Watch for workarounds. Be careful with any lender that asks for an allotment, pushes you to sign an arbitration agreement or adds “optional” products that raise the total cost. If something looks off, contact your legal assistance office or file a complaint with the CFPB.
How this applies to offers through Riverstone
Riverstone is a loan marketplace, not a lender. Loan requests through our site range from $200–$5,000, and the maximum APR offered by lenders in our network is 35.99%. Lenders, not Riverstone, make credit decisions and are responsible for following the MLA when they lend to covered borrowers.
Whatever you borrow, compare the APR and the total of payments, not just the monthly amount. Our loan calculators show the full cost before you apply, and our loan scam guide explains the red flags to watch for.
Frequently asked questions
Does the 36% cap include fees?
Yes. The Military APR includes finance charges, credit insurance premiums or fees, add-on products sold with the credit and most other fees, such as application fees, with some exceptions.
Are veterans covered by the Military Lending Act?
No. The MLA covers servicemembers on active duty, including Guard and Reserve members on active duty, and their covered dependents. Veterans who aren’t on active duty aren’t covered, though state laws still apply.
Can a lender charge me for paying off early?
Not on credit covered by the MLA. A creditor can’t charge a penalty if you repay part or all of the loan early.
Where can I get help with an MLA problem?
Your installation’s legal assistance office and financial readiness office can help for free. You can also submit a complaint to the CFPB.
This article is general information, not financial advice. Rates and rules change; check the linked sources for the latest figures.