Online Payday Loans: How Military Consumers Are Protected

Certain military personnel and family members are protected by the Military Lending Act (MLA). Payday loans, anticipated tax refund loans and auto title loans fall under this federal law. Here are your rights as an active duty member of the armed forces, reserves or National Guard when applying for online payday loans.

Online payday loans are cash advances that do not require credit checks. You'll need to provide proof of employment, but that's the main requirement that’s common in most states. Some payday loans involve writing a post-dated check that the lender cashes on a certain date, while others require your banking information so that the lender can electronically withdraw money from your account on the due date.

MLA Provisions

One of the main components of the MLA restricts lenders from charging a 36% or more interest rate on certain loans for active military members. The Military Annual Percentage Rate (MAPR) includes interest, fees, credit services and renewal charges, along with credit insurance premiums and other credit-related fees.

The MLA gives you these additional rights:

• Written and oral disclosure from creditors regarding rates and fees prior to loan approval.

• Roll-over loans or refinancing the same loan must be favorable to the borrower.

• Creditors are not permitted to force you to waive any state or federal law.

• Service members cannot be sued while on active duty.

• Arbitration involving an outside party that resolves the case instead of the court is not mandatory.

• You do not have to submit an automatic payment from your paycheck to get online payday loans.

• No penalties can result from repaying a loan early.

General Payday Loan Rights

In addition to the MLA, you have further protection from the federal Truth in Lending Act, which views payday loans the same way as conventional loans. The lender, for example, is required to disclose all costs involved with the loan upfront. In other words, the days of hidden payday loan fees are over. Lenders are further required to disclose the dollar amount and the annual percentage rate (APR) for the loan before you sign it.