SCRA vs MLA: What's the Difference?

As a military service member, you have powerful financial protections under federal law. Two of the most important are the Servicemembers Civil Relief Act (SCRA) and the Military Lending Act (MLA). While they sound similar, they serve different purposes and protect you in different ways.

This guide breaks down exactly what each law covers, who qualifies, and how to use these protections to save money and avoid predatory lending.

What Is the SCRA?

The Servicemembers Civil Relief Act (SCRA) is a federal law enacted in 2003 that protects active-duty service members from certain civil legal and financial obligations while on active duty. It replaced the older Soldiers' and Sailors' Civil Relief Act of 1940.

The SCRA is designed to ease the financial burden on service members during active duty, allowing them to focus on their mission without worrying about legal actions against them.

Key SCRA Protections

• 6% Interest Rate Cap: Reduces interest rates to 6% per year on debts incurred before entering active duty (including mortgages, credit cards, and car loans)
• Stay of Civil Proceedings: Courts must delay civil lawsuits while you're on active duty
• Default Judgment Protection: Courts cannot enter default judgments against you without first appointing an attorney to represent you
• Lease Termination: Right to terminate vehicle and housing leases under certain conditions
• Eviction Protection: Protection from eviction from rented housing
• Property Tax Deferral: Ability to defer property tax payments
• No Requirement to Get Creditor Permission: You don't need to ask your creditor to apply SCRA benefits—they must comply

What Is the MLA?

The Military Lending Act (MLA) is a federal law enacted in 2006 that protects active-duty service members and their dependents from predatory lending practices. It specifically targets consumer credit products.

Unlike the SCRA, the MLA focuses on preventing predatory lending by capping interest rates and requiring specific disclosures from lenders.

Key MLA Protections

• 36% Military Annual Percentage Rate (MAPR) Cap: Limits the total cost of consumer credit to 36% MAPR, which includes interest, fees, and credit insurance premiums
• Prohibition of Mandatory Arbitration: Lenders cannot require you to waive your right to sue in court
• Required Disclosures: Lenders must provide clear disclosures about the MAPR and your rights
• No Rollover Restrictions: Lenders cannot refinance certain types of loans repeatedly
• Creditor Must Verify Military Status: Lenders are required to check your military status before issuing credit

SCRA vs MLA: Side-by-Side Comparison

How to Use SCRA Benefits

Here's how to take advantage of SCRA protections:

1. Gather Your Documentation: You'll need your active duty orders and proof of when you entered active duty
2. Send Written Notice: Write a letter to each creditor requesting the 6% interest rate cap under the SCRA. Include a copy of your active duty orders
3. Keep Records: Keep copies of all correspondence and send letters via certified mail with return receipt
4. Follow Up: If a creditor doesn't respond within 30 days, follow up and escalate if necessary

How to Use MLA Benefits

The MLA works differently than the SCRA. Here's what you need to know:

1. Automatic Protection: The MLA is automatically enforced by the Department of Defense. Lenders are required to verify your military status
2. Check Your Rate: If you're charged more than 36% MAPR on consumer credit, you may have a claim against the lender
3. Review Disclosures: Lenders must provide specific disclosures about your rights under the MLA
4. Report Violations: If a lender violates the MLA, you can file a complaint with the Consumer Financial Protection Bureau (CFPB)

Real-World Examples

Example 1: Using SCRA for a Car Loan

You bought a car at 10% interest before joining the military. After entering active duty, you send your lender a copy of your orders and request the SCRA 6% cap. Your interest rate drops to 6%, saving you hundreds of dollars per year.

Example 2: Using MLA for a Credit Card

You're an active-duty service member and apply for a credit card with a 29.99% APR. The MLA automatically applies, capping your total cost at 36% MAPR. If the card has fees that push the total above 36% MAPR, the lender must reduce the rate or waive the fees.

Example 3: Lease Termination Under SCRA

You receive PCS orders and need to break your apartment lease. Under the SCRA, you can terminate your lease without penalty by providing written notice and a copy of your orders.