24.1 MAPR, Military Disclosures and Prohibited Credit Terms

The 36% Military Annual Percentage Rate (MAPR) Cost Cap

The cornerstone of the MLA is the 36% Military Annual Percentage Rate (MAPR) statutory cap under 32 CFR § 232.4. Creditors are strictly prohibited from imposing an MAPR exceeding 36% for any billing cycle in which credit is extended to a covered borrower.

MAPR vs. Regulation Z TILA APR

The MAPR is an "all-in" cost of credit that is significantly broader than the annual percentage rate (APR) calculated under the Truth in Lending Act (TILA) and Regulation Z:

The Bona Fide Fee Exemption for Credit Cards (32 CFR § 232.4(d))

For open-end credit cards, creditors are permitted to exclude a bona fide, reasonable fee (such as an annual membership fee, cash advance fee, or foreign transaction fee) from the MAPR calculation. However:

• The fee must be reasonable and customary compared to fees charged by other issuers for similar credit card products.
• Credit insurance and debt cancellation fees cannot be excluded under any circumstances; they must always be added to the MAPR calculation, even on credit card accounts.

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Mandatory MLA Disclosures & Contract Restrictions

Creditors extending covered consumer credit must satisfy both disclosure requirements and substantive contract restrictions before consummating a transaction.

Mandatory MLA Disclosures (32 CFR § 232.6)

Before or at the time the covered borrower becomes obligated on the credit transaction, the creditor must provide:

1. A Statement of the MAPR: A clear, written model statement describing the charges that may be assessed under the loan (the regulation provides a statutory model statement).
2. Regulation Z Disclosures: All applicable federal Truth in Lending Act disclosures required under Regulation Z (e.g., payment schedules, amount financed, finance charges).
3. Clear Description of Payment Obligation: A clear statement describing the consumer's payment obligation, such as a payment schedule for closed-end loans or account opening terms for open-end credit.
4. Mandatory Oral Disclosures: The creditor must provide the Statement of the MAPR and the description of the payment obligation orally. The creditor can satisfy this requirement either in person at the closing desk or by providing a dedicated toll-free telephone number displayed prominently on the written credit agreement, which the covered borrower can call to hear the disclosures.

Prohibited Contractual Terms (32 CFR § 232.8)

Under the MLA, creditors are legally barred from inserting any of the following terms into a covered credit agreement:

• Mandatory Arbitration Clauses: Any agreement requiring the covered borrower to submit disputes to binding arbitration is completely void and unenforceable.
• Pre-Dispute Waivers: Any provision requiring the borrower to waive rights of legal recourse under federal or state law (including rights under the SCRA).
• Mandatory Allotments: Creditors cannot require a servicemember to establish a military pay allotment as a condition of extending credit.
• Prepayment Penalties: Creditors cannot charge any penalty, fee, or premium for prepaying all or part of the loan principal balance.
• Account access: The prohibition on using a check or other method of access to an account has specified exceptions, including compliant Regulation E electronic transfers, requiring direct deposit of salary as a condition, and taking a security interest in funds deposited after extending credit. The bank still must honor separate Regulation E restrictions on compulsory repayment by preauthorized electronic transfer.

Legal Consequences of Non-Compliance

• Contract Voidness: Any credit agreement that violates the MLA or attempts to include prohibited terms is statutorily void from inception. The creditor has no legal right to collect principal, interest, or fees.
• Criminal Penalties: A creditor that knowingly violates the MLA is guilty of a criminal misdemeanor.
• Civil Liability: Consumers may recover actual damages (not less than $500 per violation), appropriate equitable relief, punitive damages, and reasonable attorney fees.

Identification safe harbor limits

A DMDC or qualifying nationwide CRA check creates a safe harbor for covered-borrower identification when conducted in the specified timing window and recorded. It does not immunize the lender from an excessive MAPR, arbitration restriction or disclosure violation. Confirm the timing rule for a firm offer, processing a credit application or consummation; a stale check outside the rule’s window cannot establish the safe harbor. Include required insurance and credit-related ancillary products in MAPR even when optional. Credit card bona fide reasonable fee exceptions and the limited credit-union application-fee exception have particular conditions; do not import them into an ordinary bank installment loan.

Current MLA identification rule and DoD 2020 interpretation.