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SCRA and MLA: How They Can Help You Financially


Have you ever been frustrated about your credit situation? You may have joined the military, hoping to get ahead, but you still have some debt you need to deal with. Did you know there are protections just for active duty military members that can help you financially? 

Life in the military can be unpredictable, and can bring with it unexpected expenses. A PCS can cost more than you think it might, and you may have to spend more than you thought during a deployment for many different reasons. While being debt free is your goal, it may seem like something always gets in the way of getting to that goal.

SCRA and MLA can help you financially. Here is how:

What is SCRA?

SCRA stands for the Servicemembers Civil Relief Act and provides important safeguards to active duty members of the US military. SCRA can help when it comes to different areas of financial management, as well as rental agreements, security deposits, evictions, and civil judicial proceedings.

SCRA was enacted in 2003, and has been amended several times since. It expanded and replaced the Soldiers’ and Sailors’ Civil Relief Act of 1940.

What Does SCRA Do To Help Your Credit?

When it comes to credit, SCRA can help in the way of capping 6% on your interest rates. This will apply to interest rates on loans and obligations that you received before you joined the military, as long as military service materially affects your ability to pay the debt.

SCRA also allows a servicemember to terminate an audiomobile lease. If the lease was from before joining the military, they may be cancelled if you have received orders to active duty for a period of 180 days or more. If you entered into the lease while on active duty, it also may be terminated if you have received PCS orders overseas or deployment orders for 180 days or more.

Mortgages are also capped at 6% during the entire period of your military service and for one year after service is over.

SCRA started covering student loans in 2008, however, if you have a federally guaranteed student loan that was originated before August 14, 2008, SCRA won’t cover it.

Basically, the 6% cap will apply to your credit cards, automobile, ATV, boat, and other vehicle loans, mortgages, home equity loans, and student loans, although there could be limitations based on the type of credit.

Who Qualifies For SCRA?

In order to qualify for SCRA, you would need to be in full-time active duty service, in any of the five branches, a reservist on federal active duty, or a national guard member on federal orders for a period of more than 30 days. If a servicemember is absent from duty for a lawful cause or because of sickness, wounds, or leave, they can still be covered by SCRA. 

Most of the SCRA protections start the day a servicemember becomes active, and would go until 30-90 days after active duty ends. Reservists would start the day that they receive certain military orders. SCRA can also apply to spouses and children of a servicemember as long as they relied on the servicemember for at least 50% of their support.

How Do You Get SCRA Benefits?

In order to receive the SCRA you qualify for, you will need to provide your creditor with a copy of your military orders, and a written notice. This notice must be send within 180 days of the end of your active duty military service. After they receive your information, the creditor must forgive interest that is higher than 6%, and it must be done retroactively. This means that you could get money back from the company. If this happens, it would be a good idea to put this money towards any debt that you have. Creditors can not accelerate the payment of principal in response to a properly made request for the 6% interest rate.

Certain companies will even go beyond what the law states and offer a bit more to service members using their SCRA benefits. American Express, Bank of America, Discover, Capital One, and Chase are examples of these companies.

What is MLA?

MLA stands for the Military Lending Act and was enacted in 2006. MLA was designed to protect active duty servicemembers, spouses, and dependents for certain lending politics. MLA can especially help with lending policies that might be risky and pose a threat to military readiness and affect retention. There have been updates in later years to make MLA even more helpful to members of the military.

What Does MLA Do to Help Your Credit?

MLA applies to payday loans, deposit advance type lending, vehicle title loans, overdraft lines of credit, and certain installment loans. It does not apply to traditional overdraft services, mortgages, auto loans when secured by the motor vehicle purchase with the loan, and other types of credit not mentioned above. It is also not for lines of credit that are used for business, agriculture, or commercial purposes.

With MLA you will have a 36% annual percentage rate cap, which covers certain finance charges, certain credit insurance premiums/fees, add-on products sold in connection with credit, and application or participation fees and related charges (exceptions may apply.) MLA also means that there can be no mandatory arbitration or prepayment penalty and no mandatory allotments.

Who Qualifies for MLA?

Active duty military, active reserve, national guard troops on Title 10 orders, and dependents with a valid military ID can qualify for MLA. Dependents are spouses, or children under 21 years of age, or children under 23 years of age who are enrolled in full-time school at an approved institution of higher learning and who depend on a servicemember for at least half of their support, or those who were a dependent at the time of the servicemember’s death. Also, children of any age that can not support themselves, because of mental and physical incapacity, that occured while dependent on a covered servicemember, for over one-half of their support, can also qualify.

MLA applies to protected accounts that were opened while the servicemember or family member are eligible.

How to Receive MLA Benefits?

In order to receive these MLA benefits you will need to contact your lenders or credit card companies. Some companies will be more generous about them as others. Some might even apply these benefits automatically but you should always double check to make sure you are receiving them.

The main difference between SCRA and MLA is when you started the line of credit or loan. For SCRA, it needs to be before active duty started, and for MLA is it after you started your service. For more information, you can find the DOD SCRA website here and the DOD MLA website here.