iLearn - 5 Facts in 1 Minute: The Military Lending Act Edition
By: Carly Souther
1. The Military Lending Act (MLA) applies to active-duty servicemembers, which includes active Guard or Reserve duty members, as well as covered dependents.
2. Servicemember Right: 36% Interest Cap. The MLA states that servicemembers cannot be charged more than a 36% Military Annual Percentage Rate (MAPR). This cap includes the following costs in calculating a servicemember's interest rate: finance charges; credit insurance premiums/fees; add-on products sold in relation to credit; and, miscellaneous fees such as application fees. This cap applies to most types of consumer loans.
3. Servicemembers Civil Relief Act. A creditor cannot require a servicemember to submit to mandatory arbitration nor give up his or her rights under State or Federal laws, such as the Servicemembers Civil Relief Act.
4. No Mandatory Military Allotments. A creditor cannot require a servicemember to create a voluntary allotment, which would automatically deduct money from the member's paycheck and apply it to loan repayment, to receive a loan.
5. No Prepayment Penalty. A creditor cannot levy a penalty against a servicemember who pays back part (or all) of his or her loan early.