Two Protections, Two Purposes

If you've heard of the SCRA (Servicemembers Civil Relief Act), you may have also heard of the MLA (Military Lending Act). Both protect service members from predatory lending, but they work in completely different ways. Understanding the distinction is crucial because it determines which benefits you can claim.

Let's break down exactly how each law works and when each applies to your situation.

The Fundamental Difference

Here's the simplest way to understand it:

  • SCRA: Protects debts you incurred before becoming active duty
  • MLA: Protects debts you incur while on active duty

Think of it this way: SCRA looks backward, protecting you from obligations you took on as a civilian. MLA looks forward, protecting you from predatory lending while you serve.

SCRA Deep Dive: The 6% Rate Cap

The SCRA's headline benefit is the 6% interest rate cap. If you have any debt from before your active duty service—mortgages, auto loans, credit cards, student loans, personal loans—you can request that the interest rate be reduced to 6%.

Key SCRA features:

  • Applies to pre-service debts only
  • Caps interest at 6% APR (including fees characterized as interest)
  • Lender must forgive interest above 6%, not just defer it
  • Can be applied retroactively with refunds
  • Protections last for duration of active duty plus applicable grace period
  • Includes foreclosure and eviction protections

What SCRA does NOT do:

  • Does not apply to debts incurred after your active duty start date
  • Does not cancel or reduce principal
  • Does not prevent negative credit reporting for non-payment

MLA Deep Dive: The 36% Cap and More

The Military Lending Act takes a different approach. Instead of reducing existing rates, it prevents lenders from charging excessive rates in the first place when lending to active duty service members.

Key MLA features:

  • Caps the Military Annual Percentage Rate (MAPR) at 36%
  • MAPR includes interest, fees, credit insurance, and other charges
  • Applies to payday loans, vehicle title loans, and certain installment loans
  • Prohibits mandatory arbitration clauses
  • Prohibits mandatory military allotments for repayment
  • Lenders must provide specific disclosures

What MLA does NOT do:

  • Does not apply to mortgages
  • Does not apply to auto loans from dealers
  • Does not apply to credit cards
  • Does not provide retroactive refunds

Real-World Examples

Scenario 1: Pre-Service Auto Loan

You financed a car six months before enlisting at 12% APR. Which law applies?

Answer: SCRA. The debt existed before active duty, so you can request the rate be reduced to 6%.

Scenario 2: Payday Loan While Active Duty

You take out a payday loan while stationed at Fort Bragg. The lender wants to charge 400% APR. Which law applies?

Answer: MLA. The loan is being made to an active duty service member, so the rate is capped at 36% MAPR. (Note: Many states also cap payday loan rates, providing additional protection.)

Scenario 3: Credit Card Opened Before Service

You have a credit card from college with a 22% APR. Which law applies?

Answer: SCRA. You can request the rate be reduced to 6%.

Scenario 4: Credit Card Opened While Active Duty

You open a new credit card while active duty with an 18% APR. Which law applies?

Answer: Neither directly. Credit cards are excluded from MLA coverage, and SCRA only applies to pre-service debt. However, some credit card issuers voluntarily offer military benefits.

Can Both Apply to the Same Person?

Absolutely. Many service members benefit from both laws simultaneously:

  • Your pre-service mortgage gets SCRA's 6% cap
  • Your pre-service credit cards get SCRA's 6% cap
  • Any covered loans you take while serving get MLA's 36% cap and protections

The laws complement each other to provide comprehensive protection.

Action Steps

To maximize your protections:

  1. Inventory your debts: List everything with the date you incurred each debt
  2. Identify pre-service debts: These qualify for SCRA's 6% cap
  3. File SCRA requests: Contact each pre-service creditor with your military orders
  4. Be cautious with new loans: Verify MLA disclosures and avoid predatory lenders
  5. Know your rights: If a lender violates MLA, you may have legal recourse

Both the SCRA and MLA exist to protect those who serve. Make sure you're taking full advantage of both.