The Military Lending Act: Your 36% Rate Cap

The Military Lending Act, 10 U.S.C. 987, caps most consumer credit for covered servicemembers and their dependents at a 36% Military Annual Percentage Rate.

Updated: 2026-10-08

The Military Lending Act is a federal law that caps the cost of most consumer credit extended to active-duty servicemembers and their dependents. Codified at 10 U.S.C. 987 and carried out at 32 CFR Part 232, it sets a 36 percent Military Annual Percentage Rate cap and bans several loan terms outright.

What the law does

The MLA limits the cost and the terms of consumer credit extended to people the law calls "covered borrowers." Its central protection is a ceiling: under 32 CFR 232.4, a creditor may not impose an MAPR greater than 36 percent on covered closed-end credit, or in any billing cycle for open-end credit. The law also requires clear disclosures before credit is issued and forbids a list of specific contract terms.

Congress passed the MLA in 2006 after a Department of Defense study found that high-cost lending near military bases was undermining financial readiness. The DoD significantly expanded the implementing rule in 2015 so that it reaches far more than payday loans. As the NCUA explains, the current rule covers credit cards, deposit advance products, overdraft lines of credit, and certain installment loans, in addition to the original short-term products.

Who is a covered borrower

The CFPB lists the people the MLA protects:

  • Active-duty members of the Army, Marine Corps, Navy, Air Force, Coast Guard, and Space Force.
  • Members of the Reserves serving on active duty.
  • Members of the National Guard mobilized under federal orders for more than 30 consecutive days.
  • Spouses of those servicemembers.
  • In some cases, their dependents.

Under 32 CFR 232.3, your covered-borrower status is measured at the moment you become obligated on the credit. Lenders can check status through the Department of Defense's MLA database, which draws on the Defense Enrollment Eligibility Reporting System. The law applies whether or not the lender realizes you are covered.

The 36% cap: what counts toward it

The MAPR is broader than the annual percentage rate you see under the Truth in Lending Act, and that is deliberate. Under 32 CFR 232.4, the MAPR must include:

  • Finance charges, calculated the same way as the APR under Regulation Z.
  • Credit insurance premiums.
  • Fees for debt cancellation and suspension agreements.
  • Fees for credit-related ancillary products sold in connection with the credit.
  • Application fees and participation fees, with narrow, bona fide exceptions for some credit card fees.

Those charges count even where Regulation Z would exclude them from the finance charge. The result is a total-cost ceiling: a loan with a modest stated interest rate can still violate the MLA if add-on fees push the MAPR above 36 percent. Lenders are allowed to refuse a loan if their pricing cannot fit under the cap. The CFPB notes that you are not guaranteed to get the loan.

Terms the MLA bans

For covered credit, the law makes it unlawful for a creditor to do any of the following, under 10 U.S.C. 987(e):

  • Roll over, renew, repay, refinance, or consolidate the debt with the proceeds of other credit from the same creditor.
  • Require the borrower to waive any right to legal recourse, including rights under the Servicemembers Civil Relief Act.
  • Require the borrower to submit to arbitration, or impose onerous legal notice provisions.
  • Demand unreasonable notice from the borrower as a condition for legal action.
  • Use a check or other method of access to a deposit, savings, or other financial account, or a vehicle title, as security for the obligation.
  • Require the borrower to set up a military allotment as a condition of credit.
  • Prohibit prepayment or charge a prepayment penalty.

The MLA also requires certain disclosures, stated orally and in writing before the credit is issued: the applicable annual percentage rate, the disclosures required under the Truth in Lending Act, and a clear description of the payment obligations.

Penalties and remedies

The MLA has real teeth. Under 10 U.S.C. 987(f), a creditor who knowingly violates the section commits a misdemeanor. A credit agreement that violates the section is void from its inception, and no agreement to arbitrate a dispute involving the credit is enforceable against a covered borrower, even though the Federal Arbitration Act generally favors arbitration. The law also provides civil liability of not less than $500 per violation, plus actual damages, possible punitive damages, equitable relief, and, in a successful action, the costs of the action.

MLA vs. the Servicemembers Civil Relief Act

The two laws are often confused because both cap a rate for military families, but they cover different debts:

| | Military Lending Act | Servicemembers Civil Relief Act |

| --- | --- | --- |

| Applies to | New consumer credit taken out during covered service | Debts incurred before military service began |

| Cap | 36% Military Annual Percentage Rate | 6% interest on pre-service obligations |

| How it starts | Applies automatically | Requires notice by the servicemember |

| Excess interest | Loan terms void if the law is violated | Interest above 6% is forgiven |

If you have an older debt from before your service, the SCRA at 50 U.S.C. 3937 is the law to look at. If you are taking out new credit now, the MLA is the one that applies.

Where to get help

  • Military OneSource offers free, confidential financial counseling to servicemembers and eligible family members. Call 800-342-9647.
  • Military legal assistance offices can answer questions about your specific situation under the MLA.
  • The CFPB takes complaints about financial companies that give you trouble about your MLA rights. Submit a complaint online or call (855) 411-2372. You can also report violations to the Department of Justice.

If you are considering a loan and you or your spouse is covered by the MLA, confirm the MAPR the lender would charge before you sign. Our APR guide explains how an annual rate is built, and short-term loan rules covers how the MLA sits alongside state law.

Have a question about a loan offer? Call (800) 236-7761 or start your free matching request below.

Frequently Asked Questions

What is the Military Lending Act?

The Military Lending Act is a federal law, codified at 10 U.S.C. 987 and implemented by the Department of Defense at 32 CFR Part 232. It limits the cost and terms of most consumer credit extended to covered servicemembers and their dependents. Its best-known limit is a 36 percent cap on the Military Annual Percentage Rate.

Who counts as a covered borrower under the MLA?

Covered borrowers include active-duty members of the Army, Marine Corps, Navy, Air Force, Coast Guard, and Space Force; members of the Reserves serving on active duty; National Guard members mobilized under federal orders for more than 30 consecutive days; spouses of those members; and in some cases their dependents. Your status is measured when you become obligated on the credit.

What is the Military Annual Percentage Rate (MAPR)?

It is the all-in cost of the credit, expressed as an annual rate. Unlike a standard APR, the MAPR includes finance charges plus credit insurance premiums, fees for debt cancellation and suspension agreements, fees for credit-related ancillary products, and most application and participation fees. Under 32 CFR 232.4, a creditor may not impose an MAPR greater than 36 percent.

Which loan terms does the MLA prohibit?

For covered credit, the law bars a creditor from requiring the borrower to waive legal rights, submit to mandatory arbitration, pay a prepayment penalty, or use a military allotment as a condition of credit. It also restricts a creditor from rolling over, renewing, refinancing, or consolidating the debt and from using a check or account access as security for the obligation.

How is the MLA different from the Servicemembers Civil Relief Act?

They cover different situations. The Servicemembers Civil Relief Act, at 50 U.S.C. 3937, caps interest at 6 percent on debts incurred before military service and forgives interest above that. The Military Lending Act applies to new consumer credit taken out during covered service and caps the all-in cost at 36 percent, applying automatically without the servicemember having to request it.

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Disclaimer

Content on this page is for general information and is not financial, legal, or tax advice.

Confirm current rates, terms, and state regulations directly with licensed lenders.