Remembering America’s Finest
Veterans Day honors the men and women who dedicated their lives in service to our nation’s defense. They’ve chosen to defend the founding principles that make our nation – even in times of great challenge – a model for freedom, justice and human dignity the world over. The sacrifices our men and women in uniform – as well as their families – make on our behalf are ones that cannot easily be repaid. The debt we owe them is doubly meaningful when our nation’s policymakers continue to turn a blind eye to the real financial needs of our servicemembers.
Earlier this year, the 2020 survey by the National Foundation for Credit Counseling found that active duty servicemembers were more than twice as likely to take out a cash advance or payday loan in 2020 than in 2019. The servicemembers said they used these loans because there were few other options available. How could this happen? In part, because of the Military Lending Act (MLA), which capped the interest rate of most loans at 36% for military personnel.
Reputable lenders cannot make small loans under 36%, because of the relative cost of small dollar extensions of credit. AFSA and many other organizations have argued for years that the 36% rate cap limits servicemembers access to traditional forms of credit, and as a result of this cap, we see our military personnel turning to less reputable lenders.
Moreover, the Department of Defense, which is tasked with, among many other things, protecting our servicemembers from predatory lenders, instead advocated for the MLA. To date, the DoD has released no data on the effectiveness of the MLA or even outcomes from the legislation. Other than surveys by private organizations, which show the MLA is actually harming some segment of servicemembers, we have no idea if the MLA is effective or helpful. Yet over the past year, the Defense Department has actually discussed pursuing a more stringent rate cap for the men and women they serve.
Before Congress and the Defense Departments create even more reasons to steer military personnel to predatory lenders, perhaps we should get the facts on what the current MLA is doing to the finances of our servicemembers. A full report from the Department of Defense on the effects of the military rate cap should be ordered by the Senate Banking Committee, the Senate Armed Services Committee, and the Biden Administration.
On this day, we thank our veterans and all active-duty military for their dedication and their sacrifice. Our nation owes them a debt, it shouldn’t be putting in policies that place that add to theirs.
November 11th, 2021 by gmcgurn@afsamail.org
