What types of loans are covered under the Military Lending Act?
Answer: 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 include, but are not limited to:
- 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.
Credit card companies don’t have to comply with the MLA until October 3, 2017.
If you’re a servicemember on active duty and decide to take out one of these loans, you have rights under the MLA, including a limit on the interest rate the creditor can charge.
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 a vehicle or home appliance.