MLA vs. SCRA: Who’s Covered, What’s Capped, and When

Last reviewed: October 2026

Two federal laws limit what a lender can charge a servicemember, and they look in opposite directions. The Servicemembers Civil Relief Act (opens in a new tab) (SCRA) caps interest at 6% on debts a servicemember took on before entering military service. The Military Lending Act (opens in a new tab) (MLA) caps the cost of most consumer credit at a 36% military annual percentage rate (MAPR) when the borrower is covered at the moment the credit is extended.

Programs mix them up because both involve a military flag and a check of the Defense Manpower Data Center (DMDC) database. A single procedure called “military lending” often tries to cover both. The gaps show up at handoffs: origination runs the MLA check, and nobody tells servicing that an SCRA request can arrive years later.

This reference sets the two laws side by side, covers where programs get them wrong, and assigns the work. It’s for compliance officers at banks and credit unions that lend to consumers, and for fintech lenders and the sponsor bank teams that review them.

One law looks back, the other looks at the moment of credit

The SCRA rate cap applies to a debt the servicemember incurred before entering military service, alone or jointly with a spouse. Once the servicemember sends written notice and a copy of orders, the creditor applies the cap as of the date the servicemember was called to service. The servicemember has until 180 days after release from service to ask.

The cap lasts for the period of military service. For a mortgage, it runs for one year after service as well. A creditor that believes service hasn’t affected the borrower’s ability to pay can ask a court for relief from the cap. It can’t make that call on its own. Reservists get the SCRA’s protections (opens in a new tab) from the date they receive orders, before they report.

The MLA works at a single point in time. The regulation (opens in a new tab) protects a borrower who is a covered member or a dependent “at the time the consumer becomes obligated on a consumer credit transaction or establishes an account for consumer credit.” A covered member is on active duty under orders that don’t specify 30 days or fewer, or on Active Guard and Reserve duty. When that status ends, the borrower stops being a covered borrower.

So the same customer can fall under one law, the other, or neither. A personal loan made to a civilian who later joins the Army is an SCRA loan. A personal loan made to an active-duty soldier is an MLA loan from day one. A purchase-money auto loan to that same soldier falls under neither rate cap: the MLA excludes it, and the debt wasn’t incurred before service.

How do the MLA and SCRA compare?

The table compares the rules that drive most program decisions.

Question	SCRA	MLA
Who is protected	Servicemembers in military service. The rate cap covers debts of the servicemember alone or jointly with a spouse.	Covered members on active duty (orders over 30 days) or Active Guard and Reserve duty, and their dependents
Which credit	Obligations incurred before military service, including mortgages	Consumer credit extended while the borrower is covered. Excludes residential mortgages and purchase-money vehicle and personal property loans secured by the item bought.
When status counts	When service begins	At consummation or account opening
Rate limit	6% per year	36% MAPR
What counts toward the limit	Interest, including service charges, renewal charges, and fees (bona fide insurance excluded)	Finance charges plus credit insurance, debt cancellation or suspension fees, credit-related ancillary product fees, and certain application and participation fees
What starts it	Servicemember’s written notice and orders, up to 180 days after release, or the creditor’s own DMDC check	Applies automatically if the borrower is covered
Effective from	The date the servicemember was called to service	The transaction or account opening date
How long it lasts	During service, plus one year for mortgages	While the borrower remains covered
Charges above the cap	Forgiven, not deferred. Periodic payments drop to match.	The contract is void from inception
Status checks	DMDC information can stand in for the servicemember’s notice	DMDC or a nationwide consumer report, at application or within 30 days before, with a record kept. Later lookback checks are barred.
Disclosures	None tied to the rate cap	MAPR statement and payment description, in writing and orally, before or at consummation
Contract terms	Foreclosing on a pre-service mortgage during or within one year after service requires a court order or a valid waiver	No mandatory arbitration, waiver of SCRA rights, prepayment penalty, or required allotment
Liability	Private suits, including class actions; criminal penalties for knowing violations	Actual damages of at least $500 per violation, punitive damages, and attorney fees; criminal penalties for knowing violations

Table sources: 50 U.S.C. 3937 (opens in a new tab), 3953 (opens in a new tab), and 4042 (opens in a new tab); 10 U.S.C. 987; 32 CFR 232.3 through 232.9.

Where programs get the two laws wrong

One flag in the core. Many systems carry a single military indicator. MLA status is fixed at origination for that transaction, but SCRA status can change at any point in the life of a pre-service loan. A flag set at account opening and never revisited will be wrong for one of the two laws.

Using DMDC the same way for both. Under the MLA, a creditor’s status determination is conclusive only if it checks at the right time and keeps a record. The regulation bars “historic lookback” checks after the account is opened. The SCRA rewards the opposite habit: the statute lets a creditor rely on DMDC information instead of waiting for the servicemember’s notice. The MLA bar is about status at origination, so it doesn’t stop a servicer from checking current active duty for SCRA purposes.

Capping the rate but not the fees. SCRA interest includes service charges, renewal charges, and fees. A servicer that drops the note rate to 6% and keeps charging a monthly account fee may still be over the cap. The MLA has its own version of this trap. The MAPR includes credit insurance, debt cancellation fees, and ancillary product fees even when Regulation Z leaves them out of the finance charge.

Deferring instead of forgiving. SCRA interest above 6% is forgiven, and each periodic payment drops by the forgiven amount. Carrying the excess as a balance due after service, or keeping the payment the same and paying the loan off sooner, doesn’t match the statute.

Starting the cap on the wrong date. The cap applies from the date the servicemember was called to service, not the date the request arrived. A request received a year into deployment means a year of interest to credit back.

Reading the MLA exemptions too broadly. The vehicle and personal property exceptions cover credit “expressly intended to finance the purchase” of the item, secured by that item. A loan that also puts cash in the borrower’s hands doesn’t fit that wording cleanly. How the exception treats add-on products financed with a vehicle has also been disputed, so get counsel’s read before treating a hybrid product as exempt.

Losing track of who does what in a partnership. In a bank-fintech lending program, the bank may be the creditor while the fintech’s platform runs the status check, delivers disclosures, and services the loan. The regulation’s ban on taking a vehicle title as security doesn’t apply to banks and credit unions, but a fintech lending under its own state license gets no such carve-out. The program agreement should say who performs each MLA and SCRA step, and the bank’s oversight should test it.

How to put it in place

1. Split the procedure in two. Write separate MLA and SCRA procedures, or two clearly separate sections, each with its own trigger, system steps, and owner. Lending owns the MLA steps at origination, and servicing owns SCRA requests and portfolio checks. The CCO signs off, and the evidence is an approved procedure plus a regulatory map row for each law that names the owner. The Lending Compliance Kit includes a servicemembers (SCRA and MLA) policy written that way.
2. Prove the MLA check happened at the right time. For a sample of new loans and accounts, compare the date of the status check record with the application date. Confirm that covered borrowers got the MAPR statement in writing and orally, and that the MAPR calculation includes every charge the regulation lists. The lending compliance lead owns the test, and the evidence is a sample worksheet showing the check date, result, and disclosure record for each loan.
3. Run SCRA requests and checks from one log. Record every SCRA request and every DMDC match with the service start date, the date the cap was applied, the amount credited back, and the new payment. Reconcile the log against the servicing system each quarter. The servicing manager owns the log, and the evidence is the log plus a quarterly reconciliation the compliance officer signs.

Both laws protect the same people, at different moments in a loan’s life. A program that keeps them separate in its procedures, systems, and testing can find its own errors before a servicemember does.

The question is never just whether a borrower serves. It’s when.

Sources

• 50 U.S.C. 3937, Maximum rate of interest on debts incurred before military service | U.S. Code, govinfo (2024 ed.) (opens in a new tab)
• 50 U.S.C. 3917, Extension of rights and protections to reserves ordered to report for military service | U.S. Code, govinfo (2024 ed.) (opens in a new tab)
• 50 U.S.C. 3953, Mortgages and trust deeds | U.S. Code, govinfo (2024 ed.) (opens in a new tab)
• 50 U.S.C. 4042, Private right of action | U.S. Code, govinfo (2024 ed.) (opens in a new tab)
• 10 U.S.C. 987, Terms of consumer credit extended to members and dependents: limitations | U.S. Code, govinfo (2024 ed.) (opens in a new tab)
• 32 CFR Part 232, Limitations on Terms of Consumer Credit Extended to Service Members and Dependents | eCFR (current) (opens in a new tab)