Yes, payday loans are covered under the Military Lending Act. Other loan products covered under the Military Lending Act (MLA) are vehicle title loans, unsecured installment loans, deposit advance products, refund anticipation loans, and overdraft lines of credit.
On the other hand, loans secured by purchased properties, such as a house or vehicle, are not covered by the MLA, which includes home equity loans, personal property loans, residential mortgages, auto loans, and mortgage refinancing loans.
The MLA is a federal law that applies to active duty service members, their spouses, and some of their dependents. It protects all parties involved from predatory lending practices.
For instance, it establishes a 36% interest rate cap (Military Annual Percentage Rate, MAPR) on most consumer loans and prohibits lenders from forcing qualified applicants into mandatory arbitration or giving up some of their legal rights as service members during a dispute. It also protects them from prepayment penalties which may apply to other civilians.
When dealing with people covered by the MLA, lenders must clearly state the MAPR, payment obligations, and account opening disclosures from the start. Borrowers may file a complaint with the Consumer Financial Protection Bureau (CFPB) if they think any of their rights have been violated. The punishments for knowingly violating the act are usually quite stiff, and the lender may be held civilly liable if guilty.
What Parties Are Covered by the Military Lending Act?
This act covers all active-duty Coast Guard, Marine Corps, Navy, Airforce, and Army members who have been serving for more than 30 days. Their dependents include spouses, incapacitated children, children younger than 21 years, service members on active National Guard reserve duty or National Guard, and full-time students younger than 23 years.