Choosing your MLA Solution: Direct or Indirect?

This article was updated on March 7, 2024. Like so many government agencies, the U.S. military is a source of many acronyms. Okay, maybe a few less, but there really is a host of abbreviations and acronyms attached to the military – and in the regulatory and compliance space, that includes SCRA and MLA. So, what is the difference between the two? And what do financial institutions need to know about them? Let’s break it down in this basic Q&A. SCRA and MLA: Who is covered and when are they covered? The Servicemember Civil Relief Act (SCRA) protects service members and their dependents (indirectly) on existing debts when the service member becomes active duty. In contrast, the Military Lending Act (MLA) protects service members, their spouses and/or covered dependents at point of origination if they are on active duty at that time. For example, if a service member opens an account with a financial institution and then becomes active military, SCRA protections will apply. On the other hand, if the service member is of active duty status when the service member or dependent is extended credit, then MLA protections will apply. Both SCRA and MLA protections cease to apply to a credit transaction when the service member ceases to be on active duty status. What is covered? MLA protections apply to all forms of payday loans, vehicle title loans, refund anticipation loans, deposit advance loans, installment loans, unsecured open-end lines of credit, and credit cards. However, MLA protections exclude loans secured by real estate and purchase-money loans, including a loan to finance the purchase of a vehicle. What are the interest rate limitations for SCRA and MLA? The SCRA caps interest rate charges, including late fees and other transaction fees, at 6 percent. The MLA limits interest rates and fees to 36 percent Military Annual Percentage Rate (MAPR). The MAPR is not just the interest rate on the loan, but also includes additional fees and charges including: Credit insurance premiums/fees Debt cancellation contract fees Debt suspension agreement fees and Fees associated with ancillary products. Although closed-end credit MAPR will be a one-time calculation, open-end credit transactions will need to be calculated for each covered billing cycle to affirm lender compliance with interest rate limitations. Are there any lender disclosure requirements? There is only one set of circumstances that triggers SCRA disclosures. The Department of Housing and Urban Development (HUD) requires that SCRA disclosures be provided by mortgage servicers on mortgages at 45 days of delinquency. This disclosure must be provided in written format only. For MLA compliance, financial institutions must provide the following disclosures: MAPR statement Payment obligation descriptions Other applicable Regulation Z disclosures. For MLA, it is also important to note that disclosures are required both orally and in a written format the borrower can keep. How Experian can help Experian's solutions help you comply with the Department of Defense's (DOD's) final amendment rule. We can access the DOD's database on your behalf to identify MLA-covered borrowers and provide a safe harbor for creditors ascertaining whether a consumer is covered by the final rule's protection. Visit us online to learn more about our SCRA and military lending act compliance solutions. Learn more

May is Military Appreciation Month, and also a fitting time to check in on the latest news attached to the Military Lending Act, with card compliance coming in October 2017.

For members of the U.S. military, relocating often, returning home following a lengthy deployment and living with uncertainty isn’t easy. It can take an emotional and financial toll, and many are unprepared for their economic reality after they separate from the military. As we honor those who have served our country this Veterans Day, we are highlighting some of the special financial benefits and safeguards available to help veterans. Housing Help One of the best benefits offered to service members is the Veteran’s Administration (VA) home-loan program. Loan rates are competitive, and the VA guarantees up to 25 percent of the payment on the loan, making it one of the only ways available to buy a home with no down payment and no private mortgage insurance. Debt Relief Having a VA loan qualifies military members for a Military Debt Consolidation Loan (MDCL) that can help with overcoming financial difficulties. The MDCL is similar to a debt consolidation loan: take out one loan to pay off all unsecured debts, such as credit cards, medical bills and payday loans, and make a single payment to one lender. The advantage of a MDCL? Paying a lower interest rate and closing costs than civilians and far less interest than paying the same bills with credit cards. These refinancing loans can be spread out over 10, 15 and sometimes 30 years. Education Benefits The GI Bill is arguably the best benefit for veterans and members of the armed forces. It helps service members pay for higher education for themselves and their dependents, and is one of the top reasons people enlist. Eligible service members receive up to 36 months of education benefits, based on the type of training, length of service, college fund availability and whether he or she contributed to a buy-up program while on active duty. Benefits last up to 10 years, but the time limit may be extended. Saving & Investing Money According to the Department of Defense’s annual Demographics Report, 87 percent of military families contribute to a retirement account. Service members who participated in the Thrift Savings Plan, however, are often unaware of their options after they separate from service, and many don’t realize the advantages of rolling their plans into an IRA or retirement plan of a new employer. Safeguarding Identity Everyone is a potential identity theft target, but military personnel and veterans are particularly vulnerable. Routinely reviewing a credit report is one way to detect a breach. The Attorney General's Office provides general information about what steps to take to recover from identify theft or fraud. Today is a great time to consider ways to support your veteran and active military consumers. They are deserving of our support and recognition not just today but continuously. Learn more about services for veterans and active military to understand the varying protections, and how financial institutions can best support military credit consumers and their families.