CashNetUSA Military Loans: Why Active-Duty Timing Matters

For MLA purposes, timing is critical. The Department of Defense regulations generally define a covered borrower based on the consumer’s status when the person becomes obligated on a consumer credit transaction or establishes an account for consumer credit. Covered members include certain service members on active duty and members serving on qualifying Active Guard and Reserve duty. Qualifying dependents may also be covered.

That means these two situations can raise very different questions:

Example 1: You opened a payday loan or other covered credit account before entering active duty.

Example 2: You opened the credit while already serving on qualifying active duty.

The MLA analysis may differ because the borrower’s status at the time the credit was extended matters. For former servicemembers, the important question is therefore not always, “Are you active duty now?” If you were serving on qualifying active duty when you obtained the credit, the terms that applied when the credit was extended may still be worth reviewing.

Open-end credit, such as a line of credit, can raise additional timing questions because the account-opening date, later draws, and changes in military status may all be relevant under the regulations.

Does the Military Lending Act Cover Payday Loans?

The MLA can cover many payday loans made to covered military borrowers.

The CFPB identifies payday loans, deposit-advance products, vehicle title loans, certain installment loans, and other forms of consumer credit among products that can fall within the MLA. Some types of credit are excluded, including certain residential mortgages and purchase-money loans secured by the vehicle or personal property being purchased.

That does not mean every payday loan made to someone in the military violates federal law.

The analysis may depend on:

• whether the borrower was a covered service member or qualifying dependent;
• when the credit was opened;
• the type of loan or account;
• the charges included in the MAPR;
• the contract terms;
• whether an exclusion applies; and
• other facts surrounding the transaction.

The lender also matters. If your loan was from CashNetUSA, identifying the precise CashNetUSA product and the state where you lived can help clarify what type of credit you received.

APR and MAPR Are Not the Same Thing

One of the most important distinctions for military borrowers is the difference between APR and MAPR.

The MLA generally prevents a creditor from imposing a Military Annual Percentage Rate greater than 36% on covered consumer credit. The MAPR calculation can include finance charges as well as certain application fees, participation fees, credit insurance costs, debt-cancellation charges, and fees for certain credit-related products.

That is different from simply saying: “The MLA caps APR at 36%.”

That statement can be misleading because APR and MAPR are separate calculations.

A loan showing an APR above 36% may give a military borrower a reason to look more closely at the transaction. It does not, standing alone, establish an MLA violation.

The relevant question is what MAPR applied to the covered credit after the required charges were included.

What About Military Spouses and Dependents?

The MLA addresses more than the cost of credit.

For covered consumer credit, federal law and Department of Defense regulations place restrictions on several types of loan terms. Among other things, the regulations address mandatory arbitration, waivers of certain legal rights, mandatory military allotments, and penalties for paying covered credit early.

What about automatic bank withdrawals?

Automatic withdrawals deserve a closer look, but they should not automatically be treated as unlawful.

The MLA does not create a blanket ban on electronic fund transfers used to repay consumer credit. Department of Defense regulations allow certain electronic repayment arrangements when other requirements are satisfied.

If payments were automatically withdrawn from your bank account, save the bank statements and loan documents. They may help show how the account operated and what repayment terms you agreed to.

What Documents Should You Save?

You do not need to calculate MAPR or determine whether federal law was violated before speaking with a lawyer.

If you still have them, consider keeping:

1. The original loan or credit agreement
2. Account-opening disclosures
3. Monthly statements
4. Emails or messages from the lender
5. Bank statements showing payments or withdrawals
6. Documents showing APR, finance charges, and fees
7. Records of additional draws, renewals, or refinances
8. Active-duty orders or other military status records
9. Spouse or dependent records, where relevant
10. Any notices concerning arbitration, payment terms, or account changes

These records may help an attorney understand what credit you received, when you received it, and which federal protections may have applied.

MLA vs. SCRA: Do Not Confuse the Two Laws

The Military Lending Act and Service Members Civil Relief Act provide different protections.

The MLA generally focuses on covered consumer credit extended while a borrower has qualifying military status. Among its protections is the 36% MAPR limit.

The SCRA addresses different situations. For example, its interest-rate protection can limit interest to 6% on qualifying debts incurred before military service when its requirements are met.

So the timing question matters:

Credit obtained while on qualifying active duty: the MLA may be particularly relevant.

Debt incurred before entering military service: the SCRA may raise separate issues.

A loan should not be analyzed under one law simply because the borrower is or was in the military.

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