A recent report by the Urban Institute, finds that the 2015 expansion of the Military Lending Act (MLA) had a negative effect on certain potential borrowers through reduced access to credit. The MLA imposed a 36 percent “all-in” APR cap on loans to service members.
Effects of Consumer Protections on Revolving Loans: The 2015 MLA Expansion, used credit bureau data from 2013 to 2021 to look at whether the 2015 expansion of the MLA actually improved credit and debt outcomes for military service members, particularly those with subprime credit scores. It found that:
- The MLA had little to no effect “on the credit health of most service members and their families.”
- The policy expansion did not decrease delinquency and collections rates among borrowers with subprime credit scores. Neither did the policy have an impact on credit scores.
- There is “suggestive evidence that consumers with deep subprime credit scores had less access to credit after the MLA was extended in 2015.”
The authors of the study conclude that efforts to impose MLA provisions on the broader public, as means of improving their financial well-being may also be misguided, saying:
“We therefore conclude that extending the consumer protections of the expanded MLA, including the 36 percent APR cap, to revolving credit products available to all borrowers would not be an effective way of improving the credit health of most Americans.”
NILA notes that the financial situation of military members has not improved in recent years. The pre-pandemic 2019 Military Financial Readiness Survey conducted by the National Foundation for Credit Counseling and Wells Fargo, finds that service members were twice as likely to be unable to pay their bills on time as they were five years prior.
SOURCE: Urban Institute
