Two federal laws protect servicemembers from financial exploitation: the Servicemembers Civil Relief Act (SCRA) and the Military Lending Act (MLA). They sound similar, but they work completely differently.

Understanding the distinction matters because claiming the wrong protection—or missing one entirely—costs military families real money. This guide breaks down exactly what each law covers, who qualifies, and how to use both.

The Core Difference: Before vs. After

Here's the simplest way to understand these two laws:

  • SCRA protects debts you had before entering active duty
  • MLA protects debts you take on while on active duty

That's the fundamental distinction. Everything else flows from this.

The Servicemembers Civil Relief Act (SCRA)

What It Does

The SCRA caps interest rates at 6% on pre-service debts and provides various legal protections during military service. It's been federal law since 1940 (originally the Soldiers' and Sailors' Civil Relief Act) and was significantly updated in 2003.

Who Qualifies for SCRA

  • Active duty servicemembers (Army, Navy, Air Force, Marines, Coast Guard, Space Force)
  • National Guard and Reserve members on Title 10 federal orders
  • Commissioned officers of the Public Health Service and NOAA

What Debts SCRA Covers

The 6% interest rate cap applies to:

  • Credit cards opened before active duty
  • Auto loans originated before entering service
  • Mortgages taken out before your service start date
  • Student loans (private) from before service
  • Personal loans predating active duty
  • Any other consumer debt incurred before service

Key SCRA Protections Beyond Interest Rates

The SCRA does more than cap interest rates:

Lease Termination Rights You can terminate residential and vehicle leases without penalty when you receive PCS orders, deploy for 90+ days, or receive stop-movement orders.

Foreclosure Protection Lenders cannot foreclose on your home during active duty and for one year after without a court order. Courts can stay foreclosure proceedings to protect servicemembers.

Default Judgments Courts cannot enter default judgments against you without first confirming you're not on active duty and appointing an attorney to represent your interests if you are.

Eviction Protection Landlords cannot evict military families without a court order if the monthly rent is below a certain threshold (adjusted annually for inflation).

Insurance Reinstatement Life insurance policies that lapse during service must be reinstated without medical examination upon return.

How to Claim SCRA Benefits

  1. Obtain copies of your military orders showing active duty status
  2. Submit written request to each lender with copies of orders
  3. Lenders must apply the 6% cap within 30 days
  4. Request retroactive refund of excess interest paid since activation

SCRA Limitations

  • Only covers pre-service debts
  • Does not apply to debts you take on after entering active duty
  • Rate returns to normal after service ends (with 30-day grace period)
  • Requires you to request the benefit (not automatic at most lenders)

The Military Lending Act (MLA)

What It Does

The MLA caps interest rates at 36% MAPR (Military Annual Percentage Rate) on new consumer credit extended to servicemembers and their dependents. Enacted in 2006 and strengthened in 2015, the MLA also prohibits certain predatory lending practices.

Who Qualifies for MLA

  • Active duty servicemembers
  • National Guard and Reserve members on active duty orders for 30+ days
  • Dependents of covered servicemembers (spouses, children)

Notice that dependents qualify for MLA protection but not SCRA protection. This is a crucial distinction.

What the 36% MAPR Includes

The Military APR is broader than a standard APR. It includes:

  • Interest charges
  • Credit insurance premiums
  • Fees for credit-related products
  • Finance charges
  • Application fees
  • Participation fees

This prevents lenders from hiding costs outside the stated interest rate.

What Debts MLA Covers

The MLA covers most consumer credit products taken out during active duty:

  • Payday loans (with restrictions)
  • Vehicle title loans
  • Installment loans
  • Credit cards (opened during service)
  • Overdraft lines of credit

What MLA Does NOT Cover

The MLA specifically excludes:

  • Mortgages (residential real property secured loans)
  • Auto loans when the vehicle serves as collateral
  • Most traditional credit cards from major banks (when they meet certain criteria under 32 CFR 232.3)
  • Personal property loans secured by the purchased item

This is important: many common military debts—including most auto loans and mortgages taken during service—fall outside MLA coverage.

MLA Prohibited Practices

Beyond the rate cap, the MLA prohibits lenders from:

  • Requiring servicemembers to waive SCRA rights
  • Requiring mandatory arbitration for disputes
  • Using military allotments for repayment
  • Requiring check-holding or vehicle title as collateral
  • Rolling over or refinancing loans to extend debt

How MLA Works

Unlike the SCRA, the MLA is automatic. Lenders are required to:

  1. Check the DoD database to verify military status before lending
  2. Provide MLA-specific disclosures before the loan closes
  3. Apply the 36% MAPR cap without you requesting it

If a lender violates the MLA, the entire loan may be voided.

MLA Limitations

  • Does not apply to pre-service debts
  • Many major debt categories (mortgages, auto loans) are excluded
  • 36% is still a high rate—protection from predatory lending, not a great deal
  • Only applies to new credit, not existing accounts

SCRA vs MLA: Side-by-Side Comparison

| Feature | SCRA | MLA | |---------|------|-----| | Interest Rate Cap | 6% | 36% MAPR | | Applies to | Pre-service debts | New credit during service | | Auto Loans | Covered | Not covered (secured by vehicle) | | Mortgages | Covered | Not covered | | Credit Cards | Pre-service cards only | Limited (most bank cards excluded) | | Payday Loans | Pre-service only | Covered | | Dependents Covered | No | Yes | | How to Claim | Must request | Automatic | | Retroactive Refunds | Yes | N/A (applies at origination) | | Legal Protections | Extensive (foreclosure, eviction, etc.) | Limited |

Common Scenarios: Which Law Applies?

Scenario 1: Credit Card from Before You Enlisted

You opened a credit card in college with a 24% APR. You enlisted two years later.

Which applies: SCRA

What to do: Submit a written request to the credit card company with copies of your orders. Your rate must be reduced to 6%, and you're entitled to a refund of excess interest paid since your active duty start date.

Scenario 2: Credit Card Opened After Joining

You enlisted first, then opened a new credit card with a 19% APR.

Which applies: MLA (if it's a covered product)

What to do: Nothing—the MLA should have been applied automatically. However, many traditional credit cards from major banks are not covered by the MLA because they can be used for real estate purchases (an MLA exclusion). If your rate exceeds 36% MAPR on a covered product, file a complaint with the CFPB.

Scenario 3: Car Loan from Before Service

You financed a car six months before joining the military at 8% APR.

Which applies: SCRA

What to do: Submit an SCRA request with your orders. Your rate should be reduced to 6%, saving you 2% interest for the duration of your service.

Scenario 4: Car Loan After Joining

You buy a car after you've been in the military for two years, financing at 7% APR.

Which applies: Neither (MLA excludes auto loans secured by the vehicle, and SCRA only covers pre-service debts)

What to do: No special military protection applies. Your 7% rate stands.

Scenario 5: Payday Loan While on Active Duty

You're in a financial bind and take out a payday loan while on active duty.

Which applies: MLA

What to do: The lender should have automatically applied MLA protections. If they charged more than 36% MAPR, the loan may be voidable. File a complaint with the CFPB and consult your JAG office.

Scenario 6: Your Spouse Gets a Credit Card

Your spouse (not a servicemember) opens a new credit card while you're on active duty.

Which applies: MLA (for covered products)

What to do: Dependents are covered by the MLA, so the 36% MAPR cap should apply automatically. Dependents are NOT covered by the SCRA for the 6% rate cap.

Scenario 7: Mortgage You Had Before Joining

You bought a home at 7.5% interest, then enlisted.

Which applies: SCRA

What to do: Submit an SCRA request. Your mortgage rate drops to 6% for the duration of your service. On a $300,000 mortgage, that 1.5% difference saves over $4,500 per year.

Using Both Laws Together

In some cases, both laws can work together:

Pre-service + New Credit: If you have old debts (SCRA-eligible) and take on new debts (MLA-eligible), you can claim protections under both laws simultaneously for different accounts.

Refinancing Trap: Be careful about refinancing. If you refinance a pre-service debt while on active duty, the new loan is no longer a pre-service obligation. You lose SCRA protection on that debt. The MLA may not cover the new loan either (especially for mortgages and auto loans).

Multiple Activations (Guard/Reserve): Each new Title 10 activation creates a new "pre-service" date. Debts you took on between activations become SCRA-eligible during your next activation.

What Neither Law Covers

Some financial situations fall outside both protections:

  • Federal student loans: The 6% rate cap exists, but it comes from the student loan servicer agreement with the Department of Education, not the SCRA. Private student loans are covered by SCRA.
  • Auto loans taken during service: MLA excludes vehicle-secured loans, and SCRA only covers pre-service debts.
  • Mortgages taken during service: Same situation—no rate cap protection.
  • Business debts: Neither law covers commercial or business obligations.

How to Verify Your MLA Coverage

The Department of Defense maintains a database that lenders use to verify military status. You can check your own status at:

MLA Database: militaryonesource.mil/financial-legal/personal-finance/mla-compliance/

This shows whether lenders should be checking your status before extending credit.

Filing Complaints for Violations

SCRA Violations

If a lender refuses to apply the 6% rate cap:

  1. File a complaint with the Consumer Financial Protection Bureau (CFPB)
  2. Contact the Department of Justice Civil Rights Division
  3. Consult your installation's legal assistance office (JAG)
  4. Contact your state attorney general

SCRA violations can result in civil penalties, private lawsuits, and criminal charges.

MLA Violations

If a lender violates the MLA:

  1. File a complaint with the CFPB
  2. Contact the Federal Trade Commission (FTC)
  3. The loan may be voidable—consult JAG before making payments

MLA violations can void the entire loan, meaning you may not owe anything.

The Bottom Line

Two laws, two different purposes:

  • SCRA: Protects you from pre-service debts at 6% interest while serving
  • MLA: Protects you and your family from predatory lending on new credit at 36% MAPR

Neither is automatic for all situations. The SCRA requires you to request benefits for each account. The MLA should be automatic but has significant exclusions (mortgages, auto loans).

Know both laws. Check all your accounts. Claim every protection you're entitled to.

If you have pre-service debts with interest rates above 6%, you're leaving money on the table. If you've been charged more than 36% MAPR on covered MLA credit products, you may be owed a refund—or the entire loan may be void.

The protections exist. They're federal law. But you have to know about them to use them.