Alphabet soup: The ABCs of military consumer protection

When new recruits join the armed forces, they enter into a unique culture, with customs, traditions, and a daily tempo that set it apart from civilian life. Military service requires new servicemembers to quickly become fluent in an alphabet soup of acronyms and jargon that form a language entirely unique to the military. Walls become bulkheads, left becomes port and right becomes starboard, cafeterias become mess halls or DFACs, a retail store becomes a PX, and a job becomes an MOS.

While most of the acronyms that make up that military alphabet soup eventually become so ingrained that servicemembers don't give them much thought, there are a few that deserve attention any time a servicemember shops, buys, borrows, rents or conducts a financial transaction. Those special acronyms represent the names of important consumer protection laws created to protect servicemembers and military families from financial fraud and unfair or abusive business practices.

July is Military Consumer Protection Month and this week is National Consumer Protection Week. To mark these events, we’re helping servicemembers learn the “ABCs” of military consumer protection.

SCRA: Servicemembers Civil Relief Act

What it is: The Servicemembers Civil Relief Act (SCRA) is a federal law that provides extra legal and financial protections for active duty servicemembers in certain situations. The law also applies to National Guard members and reservists on active duty for more 30 consecutive days. Some protections also apply to dependents.

What it does: The law allows servicemembers to cap the interest rate on certain financial obligations and protects against some adverse activity.

Examples of some protections:

• Allows servicemembers to cap the interest rate on pre-service loans at 6 percent
• Allows servicemembers to terminate contracts like vehicle leases, cell phone contracts, and residential leases under certain conditions without having to pay early termination charges or other penalties
• Provides some protections against default legal judgments and other actions like repossession, foreclosure, and eviction without a court order.

It is illegal to deny servicemembers their SCRA rights or retaliate against them for asserting them.

Where to learn more: Download the helpful factsheet about SCRA rights from the Consumer Financial Protection Bureau’s (CFPB) Office of Servicemember Affairs or visit the Department of Justice (DOJ) website for more details.

MLA: Military Lending Act

What it is: The Military Lending Act (MLA) is a federal law that puts limitations on the cost and terms of certain types of credit. It also provides active duty servicemembers (including those on active Guard or active Reserve duty), spouses and certain dependents with legal protections for many types of consumer credit and loans.

What it does: The law caps interest rates on many types of loans and prohibits lenders from forcing servicemembers and dependents of active duty servicemembers to waive certain consumer rights.

Examples of some protections:

• Caps the interest rate and most fees for many types of loans at 36 percent
• Lenders can’t require servicemembers to create military allotments to get a loan
• Creditors can’t force servicemembers into mandatory arbitration or make them waive their legal rights, including rights under the Servicemembers Civil Relief Act
• Lenders can’t prohibit prepayment or charge servicemembers a pre-payment penalty

A creditor is prohibited from charging a servicemember more than a 36 percent Military Annual Percentage Rate or otherwise violating the MLA for many types of loans.

Where to learn more: Download the helpful factsheet about MLA rights from the CFPB Office of Servicemember Affairs or visit the MLA tip page for more details.

The following consumer protection laws are not specific to military consumers. However, servicemembers have the same rights as civilians under these laws.

FDCPA: Fair Debt Collection Practices Act

What it is: The Fair Debt Collection Practices Act (FDCPA) is the main federal law that specifies what debt collectors can and cannot do when collecting certain types of debt.

What it does: The law prohibits debt collectors from using abusive, deceptive or unfair debt collection practices.

Examples of some protections:

• Generally, debt collectors aren’t allowed to contact people at a time or place known to be unusual or inconvenient. They also cannot contact you before 8 a.m. or after 9 p.m.
• Debt collectors can’t tell others, including a commanding officer or supervisor, about a debt
• A debt collector must provide you with certain information about the debt if you request it in writing

Where to learn more: Find more information on the FDCPA on the Consumer Financial Protection Bureau webpage.

FCRA: Fair Credit Reporting Act

What it is: The Fair Credit Reporting Act (FCRA) is a federal law that requires credit reporting agencies to ensure the credit history data they manage is fair, accurate, and protects consumer privacy.

What it does: The law protects a person’s right to access their credit report and have credit history information kept accurate and confidential.

Examples of some protections:

• Gives consumers the right to get a free copy of their credit report once a year from each of the three major credit reporting agencies.
• Requires credit reporting agencies to examine, verify, or remove disputed credit report information in a timely manner, usually 30 days
• Gives consumers the right to receive notice of negative information added to their credit file

The FCRA gives servicemembers the right to place free “Active Duty Alerts” on their credit profile to help prevent against identity theft while they are deployed.

Where to learn more: Find more information on the FCRA from the Consumer Financial Protection Bureau.

Local and state laws

In addition to these federal laws, many states and local jurisdictions also have laws that protect consumers, including servicemembers and military families. State Attorneys General and local consumer protection offices are a good starting point to find out what local laws are in place to protect military members.

The Military Consumer website has an extensive list of local and state laws and resources to help protect servicemembers, veterans, and military families.

Regardless of what "language" they speak now, servicemembers have earned the right to invoke any and all rights that protect them as consumers so they can tell scammer and fraudsters “Halt!" Members of the military community should all become fluent in the lingo of military consumer protection.