Are Commercial Loans Eligible For MLA Protections? | Answer

No, loans written solely for business use normally sit outside Military Lending Act rules, unless the money mainly goes toward personal expenses.

If you run a business and also wear a uniform, it can be hard to tell where the Military Lending Act starts and where it stops. Lenders advertise “commercial loans,” “business lines,” and “working capital,” yet the label on the brochure is not what decides whether MLA protections apply.

The law looks at three pieces: who borrowed the money, what the funds are really for, and whether the product counts as consumer credit. Once you understand that mix, the answer to whether a commercial loan is eligible for MLA protections becomes a lot clearer.

Military Lending Act Basics Before Any Commercial Loan Question

The Military Lending Act is a federal law that shields active duty service members and covered dependents from harsh terms on many high-cost credit products. The rule sets a 36 percent cap on the military annual percentage rate, limits certain contract clauses such as mandatory arbitration, and requires plain-language disclosures before a borrower signs.

The Defense Department rule at 32 CFR part 232 defines when these protections apply. Under that rule, MLA protections attach only when a borrower is a covered service member or dependent, the credit counts as consumer credit, and the transaction is not listed in one of the law’s express exceptions.

Consumer credit in this context means credit extended primarily for personal, family, or household purposes, with a finance charge or payable in more than four installments under a written agreement. Business purpose credit sits outside that group, just as it does in Regulation Z under the Truth in Lending Act.

Loan Types That Usually Sit Inside MLA Protections

When a covered borrower takes out a loan mainly for personal use, many everyday products fall under MLA rules. Common examples include:

• Personal credit cards used for day-to-day spending.
• Payday loans and similar small-dollar cash advances.
• Vehicle title loans where a car title secures a short-term advance.
• Overdraft lines of credit connected to a checking account.
• Most personal installment loans that do not fall into an exempt category.
• Certain private student loans that meet the consumer credit definition.

The Consumer Financial Protection Bureau’s guide to what the MLA covers explains these groups and stresses that purpose and structure drive the analysis, not marketing terms alone.

Loan Types That Fall Outside MLA Rules

The same regulation lists several categories that do not receive MLA protections even when the borrower is on active duty. These exceptions often involve larger loans secured by a home or another specific asset:

• Residential mortgages and home equity loans secured by a dwelling.
• Loans to buy or build a home that are secured by the real estate.
• Auto loans where the vehicle being purchased is the collateral.
• Other purchase money loans secured by the item being bought, such as appliances or furniture.
• Credit that does not fall under Truth in Lending disclosure rules, including business purpose credit.

That last bullet is where most commercial lending lives. If a loan is truly for business purposes, Regulation Z treats it as business credit, and the Defense Department rule does not treat it as consumer credit for MLA coverage.

Commercial Loans And MLA Coverage At A Glance

To see where commercial loans sit next to classic MLA products, it helps to compare common loan types on one page. The table below gives a quick view of how typical products line up when the borrower is otherwise covered by the Act.

Loan Type	MLA Status	Reason
Personal credit card	Covered	Revolving consumer credit for personal and household spending.
Payday loan	Covered	Short-term small-dollar credit with high finance charges.
Personal installment loan	Covered	Closed-end loan for personal expenses without an exemption.
Mortgage on primary home	Not covered	Expressly excluded as a dwelling-secured loan.
Auto loan to buy a car	Not covered	Secured by the vehicle being purchased and listed as an exception.
Term loan to an LLC for working capital	Not covered	Business purpose credit to an entity, not consumer credit.
Business credit card used only for company expenses	Not covered	Designated and underwritten for commercial use.
“Commercial” loan booked to an individual but used to combine household debts	Often covered	Use of proceeds is mainly personal, so it can count as consumer credit.

Are Commercial Loans Eligible For MLA Protections? Rules And Gray Areas

So where do commercial loans land? As a rule, a loan that is genuinely for business use is not eligible for MLA protections. The statute and regulation apply to consumer credit extended to covered borrowers, not to credit extended for trade or business purposes.

Federal Register interpretive guidance spells this out. “Consumer credit” under the MLA means credit extended primarily for personal, family, or household purposes, with a finance charge or more than four installments. Credit that is exempt from Truth in Lending because it is for business or farm use is not consumer credit for MLA purposes either.

The Federal Trade Commission’s summary of the Military Lending Act lines up with that reading. It notes that MLA protections, including the 36 percent rate cap and contract limits, apply when “consumer credit” as defined by the Defense Department is extended to service members and their dependents.

Why Loan Purpose Matters More Than The “Commercial” Label

Loan documents often use phrases like “commercial” or “business,” yet regulators care more about what the money actually does. Many banks use the same purpose test that appears in Regulation Z: if the main use is personal, family, or household, the loan leans toward consumer credit; if the main use is business or farm activity, the loan leans toward business credit.

That means a loan can carry a “business” label and still fall under MLA rules when the proceeds largely pay off personal credit cards, rent, or medical bills. On the flip side, a borrower may sign a note in their own name for equipment or inventory, and the loan may still sit outside MLA coverage when the paperwork and facts point clearly to business use.

Entity Borrowers Versus Individual Borrowers

MLA protections attach to covered borrowers who are natural persons. A corporation, LLC, or partnership is not a covered borrower, even when the owners are on active duty. When the entity is the legal borrower on the note, MLA protections do not apply to that loan.

Guidance from agencies such as the Consumer Financial Protection Bureau and the Office of the Comptroller of the Currency explains that lenders still must follow other laws, including the Servicemembers Civil Relief Act and fair lending rules. The Military Lending Act piece stays tied to consumer credit extended to an individual service member or dependent.

How Lenders Decide Whether MLA Applies To A Commercial Loan

Banks and credit unions use a simple three-step filter when they assess MLA coverage, even on a file that carries a commercial label.

Step One: Covered Borrower Check

First, the lender checks whether the applicant is a covered borrower at the time of the transaction. The Defense Department rule gives a safe harbor method that relies on a secure database or a national credit reporting agency record. If the applicant is not on active duty and is not a covered dependent, MLA protections fall away, no matter what the purpose is.

Step Two: Purpose And Product Review

Next, the lender looks at the stated purpose and the structure of the product. If the funds mainly meet personal, family, or household needs, and the credit has a finance charge or more than four installments, the loan usually falls in the consumer bucket. If the funds go to business or farm activity, or the product falls into one of the express exceptions, the lender treats the loan as outside MLA scope.

The Law Library of Congress copy of 32 CFR part 232 lays out this definition and lists the exceptions, including credit that is not subject to Truth in Lending disclosure rules. Business purpose loans sit in that excluded group.

Step Three: Apply MLA Protections When All Conditions Line Up

Only when all three elements line up—covered borrower, consumer credit, and no listed exception—must a lender apply MLA protections. Those protections include the 36 percent military annual percentage rate cap, limits on mandatory arbitration clauses, and specific written and oral disclosures at or before closing.

The Office of the Comptroller of the Currency’s handbook on the MLA shows how examiners test these steps across product types. That guidance also warns that calling a loan “commercial” does not remove MLA protections when the facts show that the funds mainly meet personal or household needs.

Common Real-Life Scenarios Involving Commercial Loans And MLA

Service members often run side businesses, own rentals, or work as independent contractors. Those real-life situations create gray areas where a loan looks commercial at first glance but still may sit inside or near MLA territory. The table below walks through several recurring situations.

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Scenario	MLA Coverage?	Reasoning
Sole proprietor takes a “business” loan to pay off credit card balances and medical bills.	Likely covered	Use of proceeds is personal and household, so the loan looks like consumer credit.
Active duty member forms an LLC and borrows for inventory and equipment.	Not covered	Entity is the borrower and funds fuel business operations.
Owner takes a commercial line of credit for repairs on several rental properties.	Often not covered	Loan proceeds relate to investment property, not daily household needs.
Service member signs a personal note for a food truck purchase, secured only by the truck.	Likely not covered	Credit is for business use and secured by the purchased asset.
Borrower requests a “commercial” cash-out refinance of a primary home to launch a small business.	Not covered by MLA	Mortgage refinance falls into a separate exemption for dwelling-secured credit.
Business credit card issued to an LLC, used sometimes for groceries and personal travel.	Usually not covered	Issuer treats the card as business purpose; personal use may create other issues but not MLA ones.
Covered borrower takes a personal installment loan and later uses the funds to start a side business.	Covered	Loan was consumer credit at origination, so MLA still applies even after later business use.

What Protections You Lose When A Loan Is Truly Commercial

When a loan sits outside MLA coverage, a covered borrower does not get the extra safeguards that would apply to a consumer product. A commercial loan does not have to follow the MLA version of the annual percentage rate test, which counts many fees and add-on products in addition to interest.

A lender may also include mandatory arbitration clauses, waivers of certain rights, and other contract language that the MLA would block in a covered consumer loan. Other federal and state rules still shape what can appear in that contract, yet the MLA rules themselves do not police a loan that is clearly for business use.

Creditors on commercial products also do not have to give MLA-specific written and oral disclosures. They must still follow any other disclosure rules that apply, such as general Truth in Lending rules for any covered consumer credit and state law notices for business borrowers, but the MLA disclosure format is reserved for loans inside its scope.

Practical Steps For Service Members Who Need Commercial Credit

Even when MLA protections do not apply, service members and spouses can still cut risk when they step into the commercial credit market. A few simple habits go a long way:

• Ask the lender whether it ran a covered borrower check and, if not, why it views the loan as outside MLA.
• Read the purpose statement on the application and confirm it matches how you plan to use the funds.
• Compare the stated annual percentage rate and total fees with offers from other banks or credit unions.
• Look closely at arbitration clauses, waiver language, and security agreements before you sign.
• Talk with your installation’s legal assistance office or a qualified consumer law attorney if the structure seems unclear or feels unfair.

Legal aid offices, state attorney general websites, and the CFPB complaint portal can help borrowers who believe a lender misclassified a consumer loan as commercial just to avoid MLA obligations.

Final Thoughts On Commercial Loans And MLA Protections

Commercial loans are generally not eligible for MLA protections because the law targets consumer credit for personal, family, or household use. When a loan truly funds business activity and the paperwork backs that up, MLA rules stay on the sidelines, even if the borrower also serves on active duty.

Where the proceeds mainly help with everyday living costs or personal debts, the story changes. In that setting, a “commercial” label on a marketing sheet or loan agreement does not cancel MLA coverage, and lenders can face real consequences if they ignore that line.

If you are a service member or spouse weighing a business loan, it pays to know how borrower status, loan purpose, and product structure fit together. That knowledge helps you spot when MLA protections stand behind you and when you need to lean more on comparison shopping, negotiation, and legal advice before signing.