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MLA Hinders Credit Access

MLA Hinders Credit Access

The Urban Institute recently posted its study on the effects of the Military Lending Act (MLA) on the financial health of active servicemembers, and while not surprising to AFSA members, who have long warned about the effects of the MLA on access to credit, the study’s conclusions should raise eyebrows on Capitol Hill and among policymakers in the states.

The Urban Institute study used credit bureau data from 2013 to 2021 to see whether the 2015 expansion of the MLA improved credit and debt outcomes for military service members, particularly those with subprime credit scores. The results?

  • The MLA had little to no effect “on the credit health of most service members and their families.”
  • There is no evidence that the policy “decreased delinquency and collections rates among borrowers with subprime credit scores, nor did the policy have an impact on these consumers’ 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:

“[E]xtending some of the provisions of the Military Lending Act, particularly the 36 percent APR cap on revolving credit products, would be unlikely to improve credit and debt outcomes for the majority of borrowers. In fact, a nationwide extension of this policy might have detrimental effects on the most vulnerable consumers by limiting their access to credit in times of need.” [Emphasis added]

As AFSA has noted in the past, over the past seven years surveys by military support organizations of servicemembers and their families have shown that the MLA has not addressed the stated goal of the 36% rate cap: protecting and improving financial well-being. In many cases it has created greater financial strain by limiting access to credit. The Urban Institute study is the latest – and perhaps most compelling – data to confirm that fact.

February 16th, 2023 by

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