The Military Lending Act caps the total annual cost of credit cards issued to active-duty service members and their dependents at 36 percent, bans mandatory arbitration and several other lender-friendly contract terms, and requires specific written and oral disclosures before you open the account. Those protections attach only when you are a “covered borrower” at the moment the account is opened, which makes timing the single most important factor in whether the law helps you.
Who Is a Covered Borrower
The MLA protects active-duty members of the Army, Marine Corps, Navy, Air Force, Coast Guard, and Space Force. It also covers Reserve members serving on active duty and National Guard members mobilized under federal orders for more than 30 consecutive days.1Consumer Financial Protection Bureau. Military Lending Act
Dependents are covered too. The regulation borrows the definition from 10 U.S.C. § 1072(2), which includes a service member’s spouse, unmarried children, and certain other family members who depend on the service member for support.2National Credit Union Administration. Military Lending Act
Coverage is decided once, at account opening. A card you already had before entering active duty is not an MLA card, even after you’re sworn in. New charges you rack up on that older card don’t retroactively bring it under the law. And once you separate, the MLA no longer covers accounts you open going forward.1Consumer Financial Protection Bureau. Military Lending Act
The 36 Percent MAPR Cap
The core protection is a ceiling on the Military Annual Percentage Rate, or MAPR. This isn’t the ordinary APR on a card’s Schumer box. The MAPR pulls in costs that a regular APR calculation leaves out, so lenders can’t hide the true price of the card in side charges.3Office of the Law Revision Counsel. 10 USC 987 – Terms of Consumer Credit Extended to Members and Dependents: Limitations
The MAPR includes interest along with credit insurance premiums, fees for debt cancellation or suspension agreements, fees for ancillary products sold alongside the card, application fees, and participation or account-opening fees.4Legal Information Institute. 32 CFR Part 232 – Limitations on Terms of Consumer Credit Extended to Service Members and Dependents – Section 232.4 All of that combined has to stay at or under 36 percent per year.
Credit cards get one accommodation the other MLA-covered products don’t. A “bona fide fee” on a credit card account can be excluded from the MAPR calculation, provided the fee is reasonable for its type. A typical annual fee or a foreign transaction fee generally qualifies. What can never be excluded, no matter what a lender calls it, are credit insurance premiums and fees for ancillary products tied to the account. Late fees and legally required taxes sit outside the MAPR because they aren’t a cost of extending credit.5Consumer Financial Protection Bureau. Military Lending Act Interagency Examination Procedures
Contract Terms Your Card Cannot Contain
A credit card agreement issued to a covered borrower cannot include several provisions that appear routinely in civilian card agreements:
- Mandatory arbitration. The lender cannot force disputes into private arbitration. An arbitration clause in a covered agreement is unenforceable even if the lender invokes the Federal Arbitration Act.
- Waiver of your legal rights, including protections under the Servicemembers Civil Relief Act.
- A required military allotment. The lender cannot condition the card on setting up an automatic deduction from your military pay.
- Prepayment penalties. You can pay off the balance early with no fee.
- A post-dated check or remotely generated payment instrument to secure or collect payment. The lender may require electronic fund transfers or salary direct deposit, and may take a security interest in a deposit account tied to the credit, provided the MAPR stays at or below 36 percent.
- Your vehicle title as collateral for the card debt.
If a covered credit card agreement includes any of these terms, the entire contract is void from inception. In plain terms, that can mean no legal obligation to repay.3Office of the Law Revision Counsel. 10 USC 987 – Terms of Consumer Credit Extended to Members and Dependents: Limitations
Disclosures You Should Receive
Before or at the time you become obligated on the card, the issuer must give you three things in writing: a statement of the MAPR, the disclosures required by the Truth in Lending Act, and a clear description of your payment obligations. The MAPR statement and payment description have to be in a form you can keep.7eCFR. 32 CFR 232.6 – Disclosures
The MAPR statement does not have to be a specific number. The lender can satisfy the requirement by describing the charges that go into the calculation, and the regulation supplies model language for that purpose.7eCFR. 32 CFR 232.6 – Disclosures
The written package isn’t enough on its own. The issuer must also deliver the MAPR statement and payment description orally, typically through a toll-free number listed in the application materials. Skipping either the written or oral delivery can undermine the enforceability of the agreement.2National Credit Union Administration. Military Lending Act
How the MLA Differs From SCRA on a Credit Card
Service members regularly conflate the MLA with the Servicemembers Civil Relief Act, and the difference decides which of your cards gets which protection.
The SCRA caps interest at 6 percent on debts you took on before entering active duty. If a credit card at 22 percent was open when you were called up, you can request a reduction to 6 percent for the duration of your service, and the excess is forgiven, not deferred. To trigger it, you have to send the creditor written notice with a copy of your orders within 180 days after your service ends.8Office of the Law Revision Counsel. 50 USC 3937 – Maximum Rate of Interest on Debts Incurred Before Military Service
The MLA runs the opposite direction in time. It covers credit extended while you’re already on active duty, and its 36 percent MAPR cap kicks in automatically with no notice or request.
That leaves a gap worth understanding. Charges you put on a pre-service card while you’re on active duty generally aren’t covered by the SCRA’s 6 percent cap, because those charges were incurred during service. The MLA doesn’t cover that card either, because you weren’t a covered borrower when the account opened. Whether either law helps a given card comes down to the date the account was opened relative to your active-duty status.
What the MLA Does Not Cover
The MLA applies only to consumer credit — credit used for personal, family, or household purposes. A card issued primarily for business or commercial use falls outside its scope.9Federal Reserve. Military Lending Act
Veterans and retirees who have already separated do not qualify for MLA coverage on cards they open after separation. Coverage is fixed at the moment the account opens; if you weren’t a covered borrower then, the MLA never attaches.
What to Do If a Lender Violated the MLA
A creditor who knowingly violates the MLA faces criminal misdemeanor charges punishable by a fine, up to one year in prison, or both.10Office of the Law Revision Counsel. 10 USC 987 – Terms of Consumer Credit Extended to Members and Dependents: Limitations
You can also sue on your own. A successful claim recovers at least $500 per violation in statutory damages plus any actual damages, punitive damages, equitable relief, and reasonable attorney fees. The statute of limitations runs to the earlier of two years from when you discover the violation or five years from when it occurred.10Office of the Law Revision Counsel. 10 USC 987 – Terms of Consumer Credit Extended to Members and Dependents: Limitations
Lenders have one narrow defense. If the violation was unintentional and came from a genuine clerical, calculation, or programming error despite reasonable procedures designed to catch it, the lender can escape civil liability. Errors of legal judgment don’t qualify.10Office of the Law Revision Counsel. 10 USC 987 – Terms of Consumer Credit Extended to Members and Dependents: Limitations
If a card issuer charged you more than 36 percent MAPR, buried an arbitration clause in the agreement, or skipped the required disclosures, you can file a complaint with the Consumer Financial Protection Bureau at consumerfinance.gov/complaint. The process asks you to describe the problem, identify the company, and upload supporting documents like statements or the cardholder agreement. Complaints can also be filed by phone at 855-411-2372, Monday through Friday, 8 a.m. to 8 p.m. Eastern.11Consumer Financial Protection Bureau. Submit a Complaint
A CFPB complaint does not substitute for a lawsuit, and the two-year discovery clock on a civil claim runs whether or not you file with the agency. Because successful plaintiffs recover attorney fees on top of damages, many consumer protection lawyers take these cases on contingency, and it’s worth a consultation early if the dollar amounts are real.