All articles 6 min read

Military Credit Protections: Interest Caps, Lending Rules, and Foreclosure

This guide presents selected U.S. government consumer education from CFPB. References to “we” or “us” in the source material refer to the issuing agency. Source dates and links appear below.

What is covered under the Military Lending Act?

Payday loans, overdraft lines of credit, and most installment loans are covered by the Military Lending Act.

As of October 3, 2016, most types of consumer loans offered to active-duty servicemembers and their dependents have to comply with the Military Lending Act (MLA). These credit products generally include:

  • Payday loans, deposit advance products, and vehicle title loans;
  • Overdraft lines of credit, but not traditional overdraft services; and
  • Installment loans, with the exceptions noted below.

NOTE: Credit card companies didn’t have to comply with the MLA until October 3, 2017.

There are some loans the MLA doesn’t cover – namely, credit that is secured by the property being purchased. These loans include:

  • Residential mortgages (financing to buy or build a home that is secured by the home), mortgage refinances, home equity loans or lines of credit, or reverse mortgages;
  • A loan to buy a motor vehicle when the credit is secured by the motor vehicle you are buying; and
  • A loan to buy personal property when the credit is secured by the property you’re buying, like jewelry or a home appliance.

The MLA applies to active-duty servicemembers (including those on active Guard or active Reserve duty) and covered dependents.

Your rights under the MLA include:

  • A 36% interest cap. You can’t be charged more than a 36% Military Annual Percentage Rate (MAPR), which generally includes the following costs in calculating your interest rate:
    • Finance charges,
    • Credit insurance premiums or fees,
    • Add-on products sold in connection with the credit, and
    • Other fees, like application or participation fees, with some exceptions.
  • No mandatory waivers of consumer protection laws. A creditor can’t require you to submit to mandatory arbitration or give up certain rights you have under State or Federal laws, like the Servicemembers Civil Relief Act.
  • No mandatory allotments. A creditor can’t require you to create a military allotment 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 can’t charge a penalty if you pay back part – or all – of the loan early.

More information about the MLA can be found here. If you have an issue with a consumer loan, you should contact your closest legal assistance (JAG) office. You can also submit a complaint to the CFPB.

Is there a law that limits credit card interest rates for servicemembers?

There are federal laws that set rate caps for service members, but no generally applicable federal law that limits the interest rate that a credit card company can charge. In most cases, the law of the state where the credit card company has its headquarters generally determines the maximum interest rate the card issuer can charge.

There are laws that limit the interest rate that you can be charged if you are an active duty servicemember (including those on active Guard or active Reserve duty) or a covered dependent.

The Military Lending Act caps the amount of interest that active duty servicemembers and covered dependents can be charged for consumer credit, in most cases, at 36%. Creditors generally needed to comply with a rule implementing the Act starting on October 3, 2016. Credit card issuers had a later compliance date of October 3, 2017. Read more about the Military Lending Act.

The Servicemembers Civil Relief Act (SCRA) limits the interest rate to 6% for active duty servicemembers for credit card balances that were incurred prior to active duty, called pre-service debt. Read more about the SCRA protections for credit cards and how you can request them

I'm in the military. Can exercising my rights under the SCRA hurt my credit score or can my lender or creditor close my account or reduce my credit?

No. You cannot be penalized solely for exercising your servicemembers civil relief act (SCRA) rights, by asking for an interest rate reduction to 6 percent, canceling an auto lease, or invoking other protections under the SCRA.

A lender or creditor can’t revoke your credit agreement, change the terms of your credit agreement, or refuse to grant you credit for exercising your SCRA rights. In addition, a lender or creditor can’t furnish negative information to a credit reporting company for invoking your SCRA rights.

If you are late or you miss a payment, your lender or creditor can report the negative information to the credit reporting companies, hurting your credit report and your credit score.

Learn more about the Servicemembers Civil Relief Act (SCRA) from the Department of Justice and whether you’re covered by the SCRA.

If you still have questions about your rights under the SCRA, contact your local JAG office for more information. To find your JAG Legal Assistance Office, use the locator. You also may be able to get assistance from your state attorney general.

If you're having trouble with credit reports and scores, you can submit a complaint with the CFPB.

Learn more about your rights under the Servicemembers Civil Relief Act

As a servicemember, am I protected against foreclosure?

If you are in military service, the Servicemembers Civil Relief Act (SCRA) provides certain protections when it comes to issues related to mortgages and housing.

If you took out a mortgage before entering active-duty military service (also known as a “pre-service mortgage obligation”), you generally can’t be foreclosed on without a valid court order while you are on active duty and for an additional 12 months after leaving active duty. This protection applies whether or not you told your mortgage lender or servicer about your military status.

The SCRA also provides servicemembers with protections against default judgments, which are rulings against a party to a lawsuit because they didn’t appear in court. This includes foreclosure cases before a judge.

If you obtained a mortgage before you went on active duty, you can ask for a mortgage interest rate reduction to 6 percent (including service charges and fees) for the entire time you are on active duty, and for an additional year after you leave active duty. Learn more about the SCRA interest rate protections.

If you still have questions about your rights under the SCRA, contact your closest legal assistance (JAG) office for more information. You also may be able to get assistance from your state attorney general.

Submit a complaint with the CFPB

If you believe a lender has discriminated against you for any reason, you can submit a complaint with the CFPB online or by calling (855) 411-CFPB (2372). You’ll need the dates, amounts, and other details about your complaint before submitting. We’ll provide you a way to monitor the status and progress of your complaint.

Learn more about your rights under the Servicemembers Civil Relief Act (SCRA)

Sources and publication details

The federal agency source text is U.S. government work in the public domain. Fynoptic selected, adapted, and formatted it for this guide. No agency endorsement is implied. Follow the linked sources for current program details and the rules applicable to your circumstances.

Back to all articles