ABOUT THE AUTHOR: Celia Winslow is president and CEO of the American Financial Services Association, the nation’s largest and oldest trade group of companies in the consumer credit marketplace.

Financial stability is paramount for members of the military and their families, as well as for the nation they serve and protect. It reduces personal distractions and concerns, allowing warfighters to focus on their duties and to successfully prepare for and complete their missions.

Recognizing the importance of sound finances to our military members, Congress passed the Military Lending Act in 2005, restricting military members’ access to certain loans over 36%, such as payday, auto-title and pawn loans, but giving the Pentagon discretion in its implementation to ensure that military members are protected and still have access to credit and the financial flexibility it enables.

The first set of regulations the Pentagon released met this objective by banning short-term loans where the lenders did not evaluate the borrowers’ ability to repay. The regulations still allowed service members to access installment loans, a form of credit used by millions of Americans.

A 2014 survey conducted by the Defense Manpower Data Center found that most service members reported sufficient access to safe, low-cost credit; had few problems managing their finances; and little use of or impact from high-cost credit products on their financial lives.

Despite this evidence, the Pentagon in 2015 changed the MLA regulations, restricting service members’ and their families’ access to safe installment loans, credit cards, and auto loan refinancing.

A decade later, there is little evidence expansion of the MLA has strengthened the finances of military personnel, but there are indications that it may be hindering financial flexibility and stability for those on the frontlines of our nation’s security.

A recent survey concluded that military households face greater financial stress than civilians. The 2024 National Foundation for Credit Counseling’s Financial Literacy and Preparedness Survey found military households have accessed payday and similar loan products twice as often as the civilian population. This, even though these lenders are barred from offering such loans above 36% to military personnel.

Significant reforms are needed to address this problem, as illustrated by multiple federal enforcement actions and lawsuits showing that active duty military personnel are assuming predatory payday and high-rate loans, sometimes at rates exceeding 400% — even up to 1,288% — which under the MLA should not be offered to them. At the same time, however, other research shows the credit-limiting effect of interest rate caps on installment loans in other contexts. The impacts of the MLA making safer, historically tested, and amply regulated financial products unavailable are real and often force military members in financial need to resort to predatory lenders.

With President Donald Trump’s February executive order focused on growing economic opportunity and security, there is a chance for the administration to improve the MLA and protect the men and women who protect our nation by enabling the financial freedoms they deserve. What can be done to address such challenges without undermining the MLA’s core mission?

First, prioritize enforcement and oversight for the military: The Trump administration has made clear the Consumer Financial Protection Bureau’s mission will be to ensure active military personnel are protected, which is a good first step.

Second, amend regulations: The Pentagon has substantial authority to change the regulations and can permit access to a wider range of products, including installment loans. The Pentagon should also allow service members to refinance their auto loans at a lower rate with non-depository institutions.

Third, study the effect of MLA regulations using solid data: The Pentagon should order a full and transparent review of the effect its restrictive regulations have on the financial health and security of those it was intended to serve. Such a study has been requested numerous times, with no serious analysis ever released.

The broad regulatory overreach introduced in 2015 has unfortunately restricted access to responsible and affordable credit for the very families the MLA aims to protect.

Rather than leaving service members facing financial distress to turn to illegal or risky alternatives due to lack of access to regulated consumer finance services, a thoughtful reassessment of the MLA would strengthen military financial readiness, empower service members to manage their finances responsibly, and uphold the law’s foundational purpose without stifling credit access.