Military Lending Protections Improved

October 3, 2014

On September 30, DoD announced improvements to the Military Lending Act (MLA) that will further protect servicemembers and their families from unscrupulous lenders.  

The MLA – originally passed in 2006 – provides servicemembers and their dependents with protections from predatory lending practices. Congress tasked the Secretary of Defense to survey troops, financial counselors and legal assistance attorneys to determine the impact and prevalence of high-cost loans in the FY2013 defense bill.   

DoD worked with federal regulators to study the issue and developed a number of new proposed protections for servicemembers and their families.  

The proposed changes to the MLA include:  

  • Establish a 36 percent cap on the annual interest rate charged for covered credit products—including credit cards—referred to as the Military Annual Percentage Rate.
  • Hold creditors responsible for providing military borrowers with additional disclosers, including a statement that they should seek other options than high-cost credit—to include financial counseling and assistance from the Military Aid Societies
  • Prohibit creditors from requiring servicemembers to submit to arbitration or waive their rights under the Servicemember’s Civil Relief Act (SCRA)
  • Expand the definition of “consumer credit’ covered by the MLA and bring any closed- or open-end loans within the scope of the regulation, with the exception of loans secured by real estate or a purchase-money loan (including a loan to finance the purchase of a vehicle).   

In response to the proposed changes, MOAA President Vice Adm. Norb Ryan said, "MOAA welcomes the Pentagon's expanded rules that will help close the loopholes that continue to allow predatory lenders to prey on military members and their families. These new rules will strengthen the service member protections by reducing financial abuses."    

Servicemembers and their families that wish to file a specific complaint on issues of deceptive financial products or services can do so with the Consumer Financial Protection Bureau.