"Payday Loans for Military Members: The 36% Rule"

Federal rules make a typical payday loan very hard to offer to an active-duty service member or their dependents. The Military Lending Act (10 U.S.C. 987) and the Defense Department's rule that carries it out (32 CFR part 232) cap the cost of covered credit at a military annual percentage rate (MAPR) of 36 percent. They also bar several terms that are common in payday and title lending. The rules cover active-duty members, Active Guard and Reserve members, and certain dependents. They do not cover everyone who has served.

Who counts as a covered borrower

The rule protects a "covered borrower." That is a covered member, or a dependent of one, at the time they take on the loan or open the account (32 CFR 232.3(g)(1)).

• A covered member is a member of the armed forces serving on active duty under title 10, 14 or 32 of the U.S. Code under a call or order that does not specify a period of 30 days or fewer, or on Active Guard and Reserve duty (232.3(g)(2)).
• A dependent is a person described in certain parts of 10 U.S.C. 1072(2), which the rule cites as subparagraphs (A), (D), (E) and (I) (232.3(g)(3)).

Status is judged at the time the loan is made. The rule does not apply if you were not a covered borrower when you took on the loan. It also stops applying once you are no longer a covered borrower (232.2(a)(1)). The rule only covers "consumer credit": credit for personal, family or household purposes that carries a finance charge or is payable in more than four installments (232.3(f)). Residential mortgages and loans to buy a car or other personal property secured by that item are excluded.

The 36% MAPR, in plain words

A creditor may not impose an MAPR greater than 36 percent on closed-end credit, or in any billing cycle for open-end credit (32 CFR 232.4(b)). The MAPR is not just the interest rate. It includes finance charges, credit insurance premiums, debt cancellation fees and fees for credit-related add-on products sold with the loan (232.4(c)). Some application fees count too. One exception: a small, short-term loan from a federal credit union or insured bank, if the fee is charged at most once in any 12-month period.

Here is a rough example, which is our own arithmetic and not a legal calculation. The CFPB says state laws typically cap payday fees at $10 to $30 per $100 borrowed. The CFPB says a two-week loan at $15 per $100 works out to an annual percentage rate of nearly 400 percent. At a 36 percent annual rate, the interest on a $300 loan held for 14 days is under $5. A $45 fee on that loan ($15 per $100) would be far over that level.

Other things lenders may not do

Section 232.8 lists limits, introduced by the statement that 10 U.S.C. 987 makes it unlawful for any creditor to extend consumer credit to a covered borrower with respect to which:

• A payday-type creditor rolls over, renews, repays, refinances or consolidates earlier credit from the same creditor with the proceeds of new credit (232.8(a)). Here, "creditor" means a business licensed or allowed to make payday-type (deferred presentment) loans. Banks, savings associations and credit unions are not included.
• The borrower must waive legal rights, including under the Servicemembers Civil Relief Act, or must submit to arbitration or onerous notice terms (232.8(b)-(d)). The rule also makes any agreement to arbitrate unenforceable against a covered borrower (232.9(d)).
• The creditor uses a check or other access to the borrower's deposit account as security (232.8(e)). There is an exception. When the MAPR is 36 percent or less, the creditor may require repayment by electronic transfer, or direct deposit of pay, unless another law forbids it.
• The creditor uses a vehicle title as security (232.8(f)). The definition of creditor here excludes chartered or licensed banks, savings associations and credit unions.
• The creditor requires the borrower to set up a military allotment to repay the loan (232.8(g)). Military welfare societies and service relief societies are outside this prohibition.
• The borrower is barred from prepaying, or is charged a penalty for prepaying (232.8(h)).

The lender must also give you disclosures before or when you sign (232.6(a)). They include a statement of the MAPR, which can describe the charges rather than give a number. They also include the usual Truth in Lending disclosures and a clear description of what you must pay.

What happens if a lender breaks the rule

A contract that fails to comply, or that contains a prohibited provision, is "void from the inception of the contract" (32 CFR 232.9(c)). A creditor that knowingly breaks the law can face a misdemeanor charge (232.9(a)). It can also be liable for actual damages of at least $500 per violation, punitive damages and attorney fees (232.9(e)). Ask a military legal assistance office or the CFPB about your own case.

How lenders check whether you are covered

A creditor can use its own method, or it can use a safe harbor. Under the safe harbor, it checks the Department of Defense database, which needs your last name, date of birth and Social Security number. Or it looks for a status flag on a report from a nationwide consumer reporting agency (32 CFR 232.5). It must keep a record of the result. That is why a lender may ask for your date of birth and SSN even for a small loan.

State rules that can matter

State laws sit on top of the federal rule. Our verified rules include only a few that mention military borrowers by name:

State	What the rule says	Law
Texas	A loan a credit access business arranges for a military member or dependent must comply with the federal Military Lending Act (10 U.S.C. 987) to the extent applicable.	Tex. Fin. Code § 393.625
Kansas	A payday lender cannot garnish the wages of a military borrower and must defer collection while the borrower is deployed to a combat posting.	Kan. Stat. Ann. § 16a-2-405(a)
Connecticut	A small loan under $5,000 may not carry an APR above 36 percent (or the lower Military Lending Act rate).	Conn. Gen. Stat. § 36a-558(d)(1)

From our state rules data, last checked October 9, 2026. Rules change. Check your state's page in the lender directory. For where payday loans are available at all, see where payday loans are legal.

Options to consider first

These are general options, not recommendations of a particular provider. Each service's own site describes what it offers, and we checked these pages on October 11, 2026.

• Army Emergency Relief. Describes itself as the official nonprofit of the U.S. Army, and says Soldiers, retired Soldiers and families can apply online for grants and zero-interest loans.
• Navy-Marine Corps Relief Society. Says it offers interest-free loans and scholarships to active duty and retired Sailors, Marines and their families, and lets you find an office and schedule an appointment.
• Air & Space Forces Aid Society. Says it provides no-interest loans and/or grants for immediate needs for Airmen and Guardians and their families.
• Coast Guard Mutual Assistance. Calls itself the official relief society of the U.S. Coast Guard, with interest-free loans and grants for the Coast Guard community, and more than 600 representatives to start with.
• A credit union PAL. Federal credit unions may offer payday alternative loans of $200 to $1,000 over 1 to 6 months, with an application fee of no more than $20 (12 CFR 701.21(c)(7)). Ask whether the credit union serves military members.
• Your command and base resources. Ask your unit's leadership or the installation's family support office about financial counseling.

Eligibility and terms are set by each society, so read its site before you go. For a plain-language look at what a fee means as a yearly rate, see how APR works in payday and cash advance loans. Title loans are covered in title loans explained.

Frequently asked questions

What is the military lending cap?

36 percent MAPR. A creditor may not impose an MAPR greater than 36 percent on closed-end credit or in any billing cycle for open-end credit (32 CFR 232.4(b)).

Does the 36% rule cover National Guard and Reserve members?

Only when they are on covered duty. The rule covers members serving on active duty under a call or order that does not specify 30 days or fewer, and Active Guard and Reserve duty (32 CFR 232.3(g)(2)).

Are dependents covered?

Yes, if they are dependents of a covered member as defined by the rule (232.3(g)(3)).

Can a lender take a military allotment for repayment?

A creditor cannot require a covered borrower to set up an allotment to repay the loan (32 CFR 232.8(g)). Military welfare societies and service relief societies are excluded from that rule.

Can a lender take my car title as security?

A creditor cannot use a vehicle title as security for covered credit (232.8(f)), except that banks, savings associations and credit unions are not "creditors" for that paragraph.

Does the rule still protect me after I leave active duty?

The rule says nothing in it applies to a loan or account "when the consumer no longer is a covered borrower" (32 CFR 232.2(a)(1)). Ask a military legal assistance office about an existing loan.

Sources

• 32 CFR part 232, Limitations on terms of consumer credit extended to service members and dependents, eCFR, checked October 11, 2026.
• 12 CFR 701.21, Loans to members (payday alternative loans), eCFR, checked October 11, 2026.
• What is a payday loan?, Consumer Financial Protection Bureau, reviewed May 28, 2024.
• Army Emergency Relief, checked October 11, 2026.
• Navy-Marine Corps Relief Society, checked October 11, 2026.
• Air & Space Forces Aid Society, checked October 11, 2026.
• Coast Guard Mutual Assistance, checked October 11, 2026.
• State rules for Texas, Kansas and Connecticut: our lender directory state rules data, last checked October 9, 2026, with the law linked in the table above.

We are not a lender. This is general information, not legal advice. Rules change; for your own case, ask a military legal assistance office, and check your state's current rules and the lender's own disclosures before you borrow.