Yes, to be eligible for the Military Lending Act’s (MLA) 36% rate cap on consumer credit, a borrower must be an active servicemember or the dependent of an active servicemember at the time that the borrower enters into the credit transaction.

The MLA regulations set forth a Military Annual Percentage Rate (MAPR), which caps the annual interest rate charged for consumer credit extended to active servicemembers and their dependents at 36% (with the exception of residential mortgage loans and purchase-money loans, which are covered by the federal Servicemembers Civil Relief Act and Illinois Servicemembers Civil Relief Act).

For a servicemember to be a covered borrower under the MLA, they must be a member of the armed forces serving on active duty or active guard and reserve duty for a period of more than thirty days at the time they become obligated on a consumer credit transaction.

A qualifying servicemember’s eligible dependents also are covered borrowers under the MLA. Eligible dependents include a servicemember’s spouse, minor child, child aged 22 or younger enrolled full-time at an institution of higher learning, mentally or physically incapacitated child, parent or parent-in-law who lives with the servicemember, or unmarried person placed in the legal custody of the servicemember.

For resources related to our guidance, please see:

• MLA Rules, 32 CFR 232.4(b) (“A creditor may not impose an MAPR greater than 36 percent in connection with an extension of consumer credit that is closed-end credit or in any billing cycle for open-end credit.”)

• MLA Rules, 32 CFR 232.3(f) (“Consumer credit means credit offered or extended to a covered borrower primarily for personal, family, or household purposes, and that is: (i) Subject to a finance charge; or (ii) Payable by a written agreement in more than four installments.”)

• Military Lending Act, 10 USC 987 (“The term ‘consumer credit’ has the meaning provided for such term in regulations prescribed under this section, except that such term does not include (A) a residential mortgage, or (B) a loan procured in the course of purchasing a car or other personal property, when that loan is offered for the express purpose of financing the purchase and is secured by the car or personal property procured.”)

• Servicemembers Civil Relief Act, 50 USC 3937(a)(1) (“An obligation or liability bearing interest at a rate in excess of 6 percent per year that is incurred by a servicemember, or the servicemember and the servicemember’s spouse jointly, before the servicemember enters military service shall not bear interest at a rate in excess of 6 percent . . . .”)

• Illinois Service Member Civil Relief Act, 330 ILCS 63/40 (“Interest or finance charges collected or charged to a service member who has entered military service, or the spouse of that service member, in connection with an obligation entered into on or after the date of August 22, 2005, but prior to the date that the service member entered military service, shall be subject to Section 4.05 of the Interest Act.”)

• MLA Rules, 32 CFR 232.3(g)(1) (“Covered borrower means a consumer who, at the time the consumer becomes obligated on a consumer credit transaction or establishes an account for consumer credit, is a covered member (as defined in paragraph (g)(2) of this section) or a dependent (as defined in paragraph (g)(3) of this section) of a covered member.”)

• MLA Rules, 32 CFR 232.3(g)(2) (“The term ‘covered member’ means a member of the armed forces who is serving on—

(i)  Active duty pursuant to title 10, title 14, or title 32, United States Code, under a call or order that does not specify a period of 30 days or fewer; or

(ii) Active Guard and Reserve duty, as that term is defined in 10 U.S.C. 101(d)(6).”)

• MLA Rules, 32 CFR 232.3(g)(3) (“The term ‘dependent’ with respect to a covered member means a person described in subparagraph (A), (D), (E), or (I) of 10 U.S.C. 1072(2).”)

• 10 USC 1072(2) (“The term ‘dependent,’ with respect to a member or former member of a uniformed service, means—

(A) the spouse; . . .

(D) a child who—

• (i) has not attained the age of 21;
• (ii) has not attained the age of 23, is enrolled in a full-time course of study at an institution of higher learning approved by the administering Secretary and is, or was at the time of the member's or former member's death, in fact dependent on the member or former member for over one-half of the child's support; or
• (iii) is incapable of self-support because of a mental or physical incapacity that occurs while a dependent of a member or former member under clause (i) or (ii) and is, or was at the time of the member's or former member's death, in fact dependent on the member or former member for over one-half of the child's support;

(E) a parent or parent-in-law who is, or was at the time of the member's or former member's death, in fact dependent on him for over one-half of his support and residing in his household; . . .

(I) an unmarried person who—

• (i) is placed in the legal custody of the member or former member as a result of an order of a court of competent jurisdiction in the United States (or possession of the United States) for a period of at least 12 consecutive months;
• (ii) either—
  • (I) has not attained the age of 21;
  • (II) has not attained the age of 23 and is enrolled in a full time course of study at an institution of higher learning approved by the administering Secretary; or
  • (III) is incapable of self support because of a mental or physical incapacity that occurred while the person was considered a dependent of the member or former member under this subparagraph pursuant to subclause (I) or (II);
• (iii) is dependent on the member or former member for over one-half of the person's support;
• (iv) resides with the member or former member unless separated by the necessity of military service or to receive institutional care as a result of disability or incapacitation or under such other circumstances as the administering Secretary may by regulation prescribe; and
• (v) is not a dependent of a member or a former member under any other subparagraph.”)