The Military Lending Act (MLA) provides some much needed protections for active duty members of the armed forces or on active Guard or Reserve duty.
Under this federal regulation, covered members of the military can’t be charged an interest rate higher than 36% on some types of consumer loans like certain payday loans, auto title loans, and tax refund anticipation loans. It also protects your spouse and certain dependents.
Beginning October 3, 2016 the MLA will provide protection for transactions with FDIC supervised institutions and by October 3, 2017, the MLA protection must be extended to all new credit card and open-end consumer credit.
A huge benefit of the MLA is the prevention of payday loan rollovers and it stops military families from being subject to arbitration clauses or waive their rights under the Servicemembers Civil Relief Act.
The key benefits and features of the MLA are:
Your rights under the MLA include:
- A 36% interest cap.You cannot be charged more than a 36% Military Annual Percentage Rate (MAPR), which includes the following costs:
- credit service charges
- credit renewal charges
- credit insurance premiums
- other fees for credit-related products sold in connection with the loan
- Written and oral disclosure. Creditors must tell you the interest rates and other fees you owe, both orally and in writing, before a loan is issued.
- No roll-over loans. A creditor cannot “roll-over” or refinance the same loan, unless the new loan results in more favorable terms for you. This rule helps to make sure you will not get stuck with a loan that becomes more expensive to pay back every few months.
- No mandatory waivers of consumer protection laws. Creditors cannot require you to waive any state or federal law, including the Servicemembers Civil Relief Act, which protects servicemembers from being sued while on active duty.
- No mandatory arbitration. Creditors cannot require you to submit to arbitration, which is when an outside party decides how a dispute should be resolved instead of a court.
- No mandatory allotments. A creditor cannot require you to create a voluntary 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 cannot charge a penalty when you pay back part or all of a loan early.
If you have an issue with a consumer loan, you can submit a complaint to the CFPB. They will forward your complaint to the company and work to get a response from them.
Contact your local Judge Advocate General’s (JAG) office to learn more about lending restrictions. You can also seek assistance from your installation financial readiness office.
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