The Military Lending Act: The 36% Cap Protecting Service Members
Active-duty service members and their families have a federal rate cap that most borrowers don't. Payday and title loans are squarely inside it.
This guide is general information for borrowers in the U.S., not financial or legal advice. Lending laws differ by state and change over time; check with your state's financial regulator or a nonprofit credit counselor about your situation.
Key points
- The Military Lending Act caps most consumer credit at a 36% military annual percentage rate.
- It covers active-duty service members and their spouses and certain dependents.
- The 36% includes most fees, credit insurance and add-on products, not just interest.
- A loan that violates the act is void from the start, and free legal help is available on base.
The Military Lending Act was passed in 2006 after the Department of Defense found that high-cost lenders were clustering around bases. The DoD’s rule was later expanded to cover most kinds of consumer credit, which means payday loans, car title loans, installment loans and credit cards are all subject to the same cap.
Who’s covered
- Active-duty service members, including National Guard and Reserve members on active duty for more than 30 days.
- Their spouses and certain other dependents.
Lenders typically check your status through a Defense Department database when you apply.
The 36% cap and what’s in it
The law caps the military annual percentage rate (MAPR) at 36%. The MAPR is broader than an ordinary APR. Along with interest, it generally includes:
- finance charges and most fees,
- credit insurance premiums,
- debt cancellation or suspension products,
- other add-on products sold with the loan.
So a lender can’t advertise a low interest rate and make it up with fees. A payday loan at $15 per $100 for two weeks, roughly 390% APR, is far over the line.
Other protections
Covered lenders also can’t:
- require you to settle disputes through mandatory arbitration;
- require a military allotment from your pay as a condition of the loan;
- charge a penalty for paying early;
- require you to waive your rights under the Servicemembers Civil Relief Act or other laws.
A credit agreement that breaks these rules is void from the start, under the law’s own terms.
What’s not covered
Mortgages and other loans secured by your home, and loans to buy a car or other personal property that’s secured by that purchase, are outside the act. Other protections may still apply.
Helpful step
Before signing any loan, take it to your installation’s legal assistance office. The review is free, and the attorneys there see MLA problems regularly.
Where to get help instead
Each service has a relief society that offers interest-free loans or grants for emergencies, often within days:
| Branch | Relief society |
|---|---|
| Army | Army Emergency Relief |
| Navy and Marine Corps | Navy-Marine Corps Relief Society |
| Air Force and Space Force | Air Force Aid Society |
| Coast Guard | Coast Guard Mutual Assistance |
Personal financial counselors on most installations can also help with a budget. If a lender has charged you more than the law allows, talk to legal assistance and file a complaint with the Consumer Financial Protection Bureau.
For civilians, rules depend on the state; see payday loan laws by state. And whatever your status, car title loans deserve particular caution.
Common questions
Are veterans covered?
No. The Military Lending Act protects people on active duty and their dependents. Once you leave active duty, the protection generally ends for new loans.
Are National Guard and Reserve members covered?
When they're on active duty under orders for more than 30 days, yes.
What's the difference between the MLA and the SCRA?
The Military Lending Act limits the cost of new credit while you're on active duty. The Servicemembers Civil Relief Act caps interest at 6% on debts you took on before entering active duty, among other protections.
