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Federal Policy PressPress Release

CLAIM VS. REALITY: New DoD Report Misses Key Information on Impact of Military Lending Act (MLA) and Military Annual Percentage Rate (MAPR) Caps

By July 28, 2021April 26th, 2024No Comments

ARLINGTON, VA. (July 28, 2021)—A new report required under on the National Defense Authorization Act (NDAA) for Fiscal Year 2021 ‘on a Military Annual Percentage Rate lower than 30%’ from the Department of Defense’s Undersecretary of Defense for Personnel and Readiness concludes that the Military Lending Act is “working as intended.”   The Department failed to provide evidence to support multiple assertions while further claims are refuted by other sources.  

  1. CLAIM:

“The Department believes the MLA and its associated MAPR support the financial readiness of Service members by ensuring covered borrowers are not subject to unfair credit practices that can negatively impact financial readiness and in turn, military readiness.”

“The Department believes the MLA is currently working as intended and that Service members continue to have ample access to necessary credit. Survey results generally reflect decreased use of high-cost credit products and improved financial condition among Service members over time. Engagements with DoD financial educators and counselors indicate fewer seek assistance for financial challenges or debt resulting from high-cost credit products. Military aid societies, which provide financial assistance, similarly report fewer requests for assistance related to highcost credit products. To date, the Department has no indication that Service members and their families lack adequate access to necessary, responsible credit.”


  • The DOD provides no evidence (no data, sources, endnotes, footnotes, hyperlinks) to support their claims.
  • A 2017 study by the U.S. Military Academy at West Point found that many of the short-term, small-dollar loan products that were outlawed under MLA had “few adverse effects” on military servicemembers. In fact, the study stated that access to payday loans may actually “decrease the probability of being involuntarily separated from the Army by 10 percent.”[i]
  • A survey of active military servicemembers and their spouses/partners was conducted by Harris Poll in 2014 and again in 2019, providing a unique perspective on how the financial situation of military service members has changed since MLA expansion took effect.[ii]
    • According to the survey, about 63 percent of respondents “paid all their bills on time” in 2019 compared to 83 percent in 2014.
    • Roughly 11 percent have debt in collections in 2019 compared to 3 percent in 2014.
    • The number of active servicemembers who worry about paying debts in 2019 has doubled relative to 2014. [iii]
  1. CLAIM:

“The 2006 Report described how predatory lenders sought out young and financially inexperienced Service members with reliable income but limited savings and credit history. These lenders provided short-term or installment loans…at high interest rates that were often marketed in a way to hide their true cost and prevent comparisons with other available options.”


  • DOD only had 180 days to prepare, conduct, and issue their 2006 report to Congress, which isn’t sufficient to conduct an analysis on a topic as important as credit access among military servicemembers.
  • The Government Accountability Office (GAO) stated that the DOD report had “methodological problems” and lacked evidence supporting several of its recommendations and its conclusion.
    • More specifically, GAO said the report contained “methodological problems in some of its analyses and in some of the studies cited in its report, particularly for the description of the prevalence and assessment of the effects of predatory lending practices.”
  • DOD relied mostly on information provided by consumer groups and military charity organizations—which also had methodological problems—and largely neglected federal regulators and industry concerns.
  1. CLAIM:

“The Department takes no position on the merit of any change to lower the maximum MAPR rate under 30 percent. The timeline for requested submission of this report did not allow for substantial new data collection strictly for this report.”


  • The DOD cannot say whether an APR of 30 percent would be materially different than 36 percent since it has no data justifying such a cap and wasn’t given enough time to conduct a sound analysis.
  1. CLAIM:

“The Department believes that Service members do not have significantly different credit scores than civilians across the entire population, and thus this data can be used to roughly reflect the credit score distribution of active-duty Service members.”


  • According to the DOD, 41 percent of military servicemembers have FICO scores under 620. It would be very difficult for these individuals to obtain short-term credit under a 36 percent rate cap.
  • CLAIM:

“Even some online lenders that traditionally targeted the military population and charged exorbitant interest rates have modified their lending practices to comply with the MLA’s cost of credit limit.”


  • The DOD, again, fails to provide any loan volume data from these online lenders.
  • Lenders will comply with MLA, as it is required by law, but that does not necessarily mean they will offer loans to servicemembers.
  • CLAIM:

A 28 percent rate cap “on small-dollar personal loans would bring these products in line with existing rules governing federal credit unions, where such products continue to be widely-available. Assuming limits consistent with these findings, the Department would anticipate no negative impact to readiness or retention, even if some creditors choose to no longer offer credit to borrowers covered by the MLA.”


  • Again, the DOD provides no data on loan volume to military servicemembers.

Major banks, like U.S. Bank, and specialty finance companies have indicated the difficulty in offering short-term, small-dollar loans under a 36 percent rate cap.


[i] Susan Payne Carter and William Skimmyhorn, “Much Ado About Nothing? New Evidence on the Effects of Payday Lending on Military Members,” Review of Economics and Statistics, October 2017:


[iii] “Findings from Survey on Credit Access Among Americans and Active Duty Military Households,” HarrisX, January 2020.