Military Families and Financial Readiness

December 9, 2021 – January 12, 2022 R46983

Military Families and Financial Readiness
January 12, 2022
DOD identifies financial readiness as one of the major components of military family readiness
and, ultimately, operational readiness. It has been defined as, “the state in which successful
Kristy N. Kamarck
management of personal financial responsibilities supports a servicemember’s ability to perform
Specialist in Military
their wartime responsibilities.” Congress, under its constitutional authority to regulate the
Manpower
military, has oversight for readiness issues and related DOD efforts. Over the past several

decades, Congress and DOD have taken action through law and regulation to improve military
readiness, including enhancing military consumer protections, increasing financial literacy of

servicemembers and dependents, and providing direct financial support to the lowest-income or
otherwise vulnerable families during times of need or national emergency.
While servicemember compensation compares favorably to civilian compensation for employees with the same levels of
education and experience, total compensation is just one determinant of financial readiness. Financial readiness for military
families also depends on other factors like budgeting, debt management, and sound financial planning. Certain aspects of
military service can make personal financial management more challenging (e.g., frequent or unpredictable deployment
cycles and permanent change-of-station moves). Approximately 40% of the total DOD military force is 25 years old or
younger. DOD survey data have found generally that junior enlisted servicemembers experience lower levels of financial
well-being than officers. Data also suggest that Reserve Component (RC) members may experience financial instability at
higher rates than active duty members; moreover, depending on their duty status, RC members may not be consistently
eligible for the same military-specific consumer protections as their active duty counterparts.
The Armed Services Committees may consider initiatives to improve military family financial readiness or to modify
compensation and benefits during the annual defense authorization and appropriations processes. While Armed Services are
the primary committees of jurisdiction for military regulations, the Senate Banking, Housing, and Urban Affairs and House
Financial Services committees have purview over financial market regulations. These latter committees might consider
legislation regarding military-specific financial regulations, their implementation, and enforcement.

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Contacts
Author Information ........................................................................................................................ 24

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Military Families and Financial Readiness

Introduction
As the Department of Defense (DOD) develops policies and programs for recruitment, retention,
morale, and operational readiness it takes into account servicemember and military family
readiness.1 DOD identifies financial readiness as one of the major components of family
readiness, and ultimately operational readiness. It has been defined as, “the state in which
successful management of personal financial responsibilities supports a servicemember’s ability
to perform their wartime responsibilities.”2 DOD evaluates financial readiness through measures
of financial stability and security.
For servicemembers, financial instability can damage well-being, morale, productivity, and job
performance. DOD surveys have found that those who report financial management challenges
are more likely to express dissatisfaction with military compensation, coworkers, and the overall
military way of life. Serious financial issues, like over-indebtedness or bankruptcy, can lead to
loss of security clearance3, administrative sanctions, or even involuntary discharge from the
military.4 In 2014, DOD estimated that 80% of security clearance revocations and up to 4,703
separations each year are related to financial difficulties. Unplanned personnel losses are costly to
the military in terms of the loss of investment in the servicemember’s recruitment, training, and
education. Individual financial woes may also contribute to unit readiness issues if the affected
personnel are ineligible to participate in training and operations due to losing a security clearance,
or if administrative burdens draw leaders’ attention away from mission-essential tasks.
Congress, under its constitutional authority to regulate the military, has oversight of readiness
issues and can mandate policies and programs for DOD implementation. The Armed Services
committees may consider initiatives to improve military family financial readiness or to modify
compensation and benefits during defense authorization and appropriations processes. While
Armed Services are the primary committees of jurisdiction for military regulations, the Senate
Banking, Housing, and Urban Affairs and House Financial Services committees have purview
over financial market regulations. These latter committees might consider legislation regarding
military-specific financial regulations, their implementation, and enforcement.
This report focuses primarily on legislative history and policy options for improving financial
readiness of military servicemembers and their families, including servicemember-specific
consumer protections and financial literacy initiatives. This report does not address the financial
health and financial support programs that support military veterans or DOD civilians. It also
does not address financial sector law and regulations that provide consumer protections more
broadly for all U.S. citizens.5

1 DOD, Military Family Readiness, DODI 1342.22, August 5, 2021.
2 Office of the Undersecretary of Defense for Personnel and Readiness, Directive-type Memorandum (DTM) 19-009—
Financial Readiness Common, August 13, 2019.
3 A credit history is component of all national security background investigations. See, DOD, Procedures for the DOD
Personnel Security Program (PSP), DODM 5200.02, October 29, 2020.
4 Department of Defense, “Limitations on Terms of Consumer Credit Extended to Service Members and Dependents,”
Federal Register, DOD-2013-OS-0133, November 28, 2014.
5 For more on consumer finance and consumer protection policies, see CRS Report R45813, An Overview of Consumer
Finance and Policy Issues, by Cheryl R. Cooper.
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Military Compensation
The perceived adequacy of military compensation is often a subject of concern from broad swaths
of the electorate. There is general consensus that military servicemembers should be adequately
compensated for particular hazards and hardships associated with service, including deployments
to hostile environments, frequent moves, long and inflexible hours, and other strenuous work
conditions. As such, reports of military servicemembers facing financial instability, visiting food
banks or qualifying for welfare programs often lead to calls for congressional action to increase
military pay.6 Yet, several recent studies have found that military compensation compares
favorably with civilian compensation for those with the same level of education and experience.
Past Congresses have taken action to modify military pay scales or otherwise increase cash and
noncash benefits to make servicemember pay competitive with civilian pay for equivalent
education and experience. Meaningful comparisons with civilian compensation are predicated on
an understanding of the elements of military pay. Every servicemember is entitled to military
basic pay and the level of pay depends on the member’s paygrade (rank) and years of service.7
Basic pay is typically the largest component of cash compensation for servicemembers.8
However, when making comparisons with civilian compensation, analysts typically use a measure
called Regular Military Compensation (RMC), which takes into account the total cash value
servicemembers receive from the government. RMC is statutorily defined and includes (1) basic
pay, (2) basic allowance for housing, (3) basic allowance for subsistence, and (3) the federal tax
advantage accruing to allowances that are not subject to federal income tax.9 See Table 1 for a
sample comparison of basic pay and RMC.
Table 1. Sample Comparison of Annual Basic Pay and RMC for Single
Servicemembers
2021
Pay Grade and Years of Service
Annual Basic Pay
Estimated Annual RMC
E-3 (enlisted) with under 2 years of service
$25,247
$48,844
E-7 (enlisted) with 16 years of service
$58,741
$91,534
O-2 (officer) with 2 years of service
$53,312
$83,454
O-4 (officer) with 12 years of service
$96,800
$136,000
Source: DOD, Selected Military Compensation Tables, January 1, 2021, Cash Allowance Tables by Pay Grade
and Family Size.
DOD’s benchmark goal for RMC is the 70th percentile for comparable civilian wages and
salaries.10 This is the level at which prior research determined that DOD could be competitive in

6 See for example, Dorian Merina, “When Active-Duty Service Members Struggle to Feed Their Families,” National
Public Radio, April 19, 2017; and Cynthia McFadden, Christine Romo, and Kenzi Abou-Sabe, “Why are many of
America's military families going hungry?,” NBC News, July 12, 2019.
7 See military pay tables at https://www.dfas.mil/militarymembers/payentitlements/Pay-Tables/.
8 Congressional Budget Office, Approaches to Changing Military Compensation, January 2002, https://www.cbo.gov/
system/files/2020-01/55648-CBO-military-compensation.pdf.
9 37 U.S.C. §101(25). For more on RMC and military pay, see CRS Report RL33446, Military Pay: Key Questions and
Answers, by Lawrence Kapp and Barbara Salazar Torreon, and CRS In Focus IF10532, Defense Primer: Regular
Military Compensation, by Lawrence Kapp.
10 Report of the Ninth Quadrennial Review of Military Compensation, Volume 1, March 2002.
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recruiting and retaining the required quality and quantity of personnel.11 Recent studies have
found that military compensation meets or exceeds this benchmark; with enlisted RMC at about
84th to 90th percentile of civilian wages and officer RMC between the 70th to 80th percentile.12
Along with RMC, servicemembers and their eligible family members also receive several other
benefits such as discounted groceries and household items at military commissaries, free or
reduced price access to gym and recreation facilities, subsidized childcare, and no-cost or low-
cost medical and dental care. Finally, some members also receive deferred compensation in the
form of a life-long pension and health benefits for military retirees, and certain benefits from the
Department of Veterans’ Affairs for eligible retirees and veterans.13
Servicemember Financial Management Challenges
Compensation and benefits are one component of financial readiness; however, financial security
for military families also depends on other factors. According to one study’s findings, “financial
problems [among servicemembers] are shaped by spending patterns and management skills rather
than by income itself.”14 Certain aspects of military service can make personal financial
management more challenging than it is for many civilians. For example, frequent or
unpredictable deployment cycles, and limited access to digital or postal communications while
deployed, could lead to delays in meeting financial commitments (e.g., loan or utility
payments).15 Frequent change-of-station moves can make it more difficult for a member’s spouse
to maintain consistent employment and earnings.16 A family accustomed to budgeting with two
income streams might struggle with debt payments following a move to a duty station where the
military spouse is unable to find employment or where remuneration levels are significantly
lower for similar work. As noted by one Marine Corps spouse
The bills we built on two incomes quickly led us to debt,” she said. “Debt led us to be
unable to do certain things, like pay bills on time, and spiraled to almost having a car
repossessed. We got to a place where we couldn’t afford groceries for daily needs.17

11 Beth J. Asch, Setting Military Compensation to Support Recruitment, Retention, and Performance, RAND
Corporation, Santa Monica, CA, 2019.
12 Comparisons are based on weighted averages taking into account education level and age. Report of the Thirteenth
Quadrennial Review of Military Compensation, Volume 1. Main Report, December 2020, p. 6. Congressional Budget
Office, Approaches to Changing Military Compensation, January 2020, p. 16.
13 See CRS Report RL34751, Military Retirement: Background and Recent Developments, by Kristy N. Kamarck, CRS
Report R42747, Health Care for Veterans: Answers to Frequently Asked Questions, by Sidath Viranga Panangala and
Jared S. Sussman, CRS Infographic IG10009, The Road to Veterans Benefits, by Kristy N. Kamarck and Sidath
Viranga Panangala, and CRS Report RS22804, Veterans’ Benefits: Pension Benefit Programs, by Scott D. Szymendera
and Carol D. Davis.
14 Richard Buddin and D. Phong Do, Assessing the Personal Financial Problems of Junior Enlisted Personnel, RAND
Corporation, January 2002.
15 Richard Buddin and D. Phong Do, Assessing the Personal Financial Problems of Junior Enlisted Personnel, RAND
Corporation, January 2002, p. xiv. Although there have been advances in online banking and bill-paying,
servicemembers may not have unfettered access to digital communication while in a deployed or operational status.
16 For more on spouse employment, see CRS Report R46498, Military Spouse Employment, by Kristy N. Kamarck,
Barbara L. Schwemle, and Sofia Plagakis.
17 Karen Jowers, "First lady says more money needed to fight hunger in military families," MilitaryTimes, October 15,
2021.
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Permanent change-of-station (PCS) moves, while paid for by the military, may impose additional
financial burdens for example, with the costs of establishing a new household (e.g.,
security/utility deposits), or fees associated with buying/selling a home.
The military has a relatively young workforce; approximately 40% of the total DOD military
force is 25 years old or younger.18 There is some evidence that junior enlisted servicemembers
with less income and lower financial literacy19 may struggle with managing their finances or be
more susceptible to prohibited consumer lending practices.20 Given that junior enlisted
servicemembers (grades E-1 to E-4) tend to be younger and not college educated, these findings
comport with research suggesting lower financial literacy levels among non-college-educated
young adults than among other adults.21 There are also documented incidences of predatory
commercial activity targeting servicemembers with high-cost, or high-interest rate plans that
contribute to military family indebtedness (see discussion in “Servicemember-specific Consumer
Protections”).22
Assessing Servicemember Financial Readiness
Since 2015, DOD has had a statutory obligation to conduct an annual survey of servicemembers
to assess the “status of the financial literacy and preparedness of members of the armed forces”
and to report to the House and Senate Armed Services Committees.23 This is the main instrument
for assessing financial readiness across the force. DOD collects the data from a representative
cross-section of the active and reserve components (AC and RC) using the Status of Forces
Survey (SOFS).24 The surveys include knowledge-based questions to assess servicemembers’
general financial literacy and understanding of military-specific benefits. These questions mirror
questions that are included in other federal civilian surveys for ease of comparison between
military and civilian populations.25 The SOFS also includes the Consumer Financial Protection
Bureau’s (CFPB’s) financial well-being scale.
In terms of the overall financial condition of military forces, survey data from 2019 indicate that
72% of AC and 69% of RC personnel were “very comfortable and secure” or “able to make ends
meet without much difficulty.”26 This reflects improved conditions over prior-year survey results;

18 Department of Defense, 2020 Demographics; Profile of the Military Community, Table 1.09, 2020, p. 8.
19 Financial literacy describes the "skills, knowledge, and tools that equip people to make individual financial decisions
and actions to attain their goals." See U.S. Financial Literacy and Education Commission (FLEC), U.S. National
Strategy for Financial Literacy, 2020, p. 2, at https://home.treasury.gov/system/files/136/US-National-Strategy-
Financial-Literacy-2020.pdf.
20 DOD, Department of Defense Annual Report on the Financial Literacy and Preparedness of Members of the Armed
Forces, December 2020.
21 Annamaria Lusardi, et al., “Financial Literacy among the Young: Evidence and Implications for Consumer Policy,”
National Bureau of Economic Research, September 2009.
22 Department of Defense, Insurance Solicitation Practices on Department of Defense Installations, Final Report, May
15, 2000.
23 P.L. 114-92 §661, 10 U.S.C. §992.
24 The SOFS is administered by DOD’s Office of People Analytics (OPA). Separate surveys are administered to the
Active and Reserve components.
25 DOD, Annual Report on the Financial Literacy and Preparedness of Members of the Armed Forces, Results from the
2019 Status of Forces Survey, December 2020. Other surveys that include these questions include Federal Reserve
Board of Governors’ Survey of Household Economics and Decisionmaking (SHED), and the FINRA Investor
Education Foundation’s National Financial Capability Study (NFCS).
26 DOD, Department of Defense Annual Report on the Financial Literacy and Preparedness of Members of the Armed
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however, these data do not capture the potential impacts from the Coronavirus Disease 2019
(COVID-19) pandemic, which began in 2020. One area of potential concern includes saving and
spending habits. A little over one-third of servicemembers report having zero or less than one
month of emergency savings and nearly one-fifth of members spend all or more of their income
on a monthly basis.27
Officers are More Financially Stable
The 2019 SOFS data indicate that officers, who generally have higher pay than enlisted
personnel, report higher levels of financial security.28 In 2019, more than 80% of officers across
both components indicated that they were comfortable in their financial position. In comparison,
among junior enlisted personnel (grades E-1 to E-4), 65% of AC and 60% of RC personnel
indicated that they were financially comfortable.29 Junior enlisted were more likely than officers
to report low or zero emergency savings, and missed credit card payments and/or bank overdraft
fees in the past twelve months.30
Financial Security is Higher among Active Component Servicemembers than
Reserve Component
Overall financial security was also higher for the AC relative to the RC across most measures. In
addition to performing more poorly on spending and savings measures, RC members were more
likely to have debts referred to collection, have utilities shut off, or to have two or more
overdrawn checks per year. Members of the RC, who typically perform military duty part-time
and therefore receive only part-time military pay and fewer benefits, may be more vulnerable to
downturns in the civilian economy. RC members were also less likely to access DOD financial
education and other resources, likely due to both the part-time nature of their military
employment and the broader geographical distribution of reserve units, which may limit access to
military-installation based services.31
Congressional Action to Support Military Financial
Readiness
Congress has pursued legislation to address two aspects of military financial readiness:
(1) servicemember-specific consumer protections and (2) financial literacy and education
programs. Over the past few decades, Congress has enacted financial market regulations to
protect servicemembers from certain marketing practices on military installations, to restrict sales
of high-interest credit/loan products to servicemembers, and to limit debt liability for members
during periods of active duty. Financial literacy and education initiatives for servicemembers and
their family members seek to improve decision-making about various consumer financial

Forces, December 2020, p. 3.
27 Ibid., p. 9.
28 Ibid p. 4. The Defense Finance and Accounting Service (DFAS) published military pay tables at
https://www.dfas.mil/militarymembers/payentitlements/Pay-Tables/.
29 DOD, Department of Defense Annual Report on the Financial Literacy and Preparedness of Members of the Armed
Forces, December 2020.
30 Ibid., pp. 9-11.
31 Ibid., p. 7.
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products and to facilitate healthy financial habits among military households. A list of selected
legislation can be found in Table A-1.
Servicemember-specific Consumer Protections
DOD has had policies in place to protect servicemembers from “deceptive or coercive” sales
tactics of financial products since former Defense Secretary Melvin Laird recognized the issue in
1971.32 Laird sought to protect servicemembers from these tactics by directing the first policies
prohibiting certain solicitation activities on military installations.33 While the military had long
been aware of this issue, enhanced public scrutiny in the past few decades has led to several
statutory and policy changes to enhance consumer protections for servicemembers and their
families.
In 2000, DOD released a study on financial services solicitation on military bases that found
frequent violations of policies, inadequate processes for reporting, investigating, and addressing
violations, and a lack of expertise and resources among those in the military services to regulate
the conduct of solicitors.34 The report also highlighted some of the unique characteristics of
military service that can lead servicemembers to be more susceptible to certain marketing
practices:
Within the military community, military authority affects the private commercial behavior
of military personnel as well as their public behavior. Subordinates heed their superiors in
their private financial dealings in ways that are not common to the civilian community.
Historically, military superiors have played a quasi-parental role in regard to personal
financial affairs. Even today, mentors play a real role in these activities. In almost all cases
of on base insurance sales, the agent has a letter signed by a senior military official that
authorizes the sales activity. In addition, the consumer's guard is down when the sale occurs
on the installation because mere presence on a military installation connotes approval by
official authority.35
In the early 2000s, while contingency operations in Afghanistan and Iraq were escalating, DOD
and Congress raised concerns about the financial well-being of servicemembers and their
families, including those being called up from the reserve component.36 During this time, media
reports also highlighted ethically questionable sales tactics by certain insurance agents to military
personnel, and criticized Congress and the Pentagon for lax oversight of the issue.37

32 Department of Defense, Insurance Solicitation Practices on Department of Defense Installations, Final Report, May
15, 2000, p. iv.
33 Ibid.
34 Ibid.
35 Ibid., p. 2.
36 See for example, U.S. Congress, Senate Committee on Banking, Housing, and Urban Affairs, A Review of the
Department of Defense’s Report on Predatory Lending Practices Directed at Members of the Armed Forces and Their
Dependents, Hearing on Unfair or Abusive Loans, Credit Sales Transactions, and Collections Practices that are
Particularly Harmful to Service Members As it Undermines Military Readiness and Harms Troop Morale, 109th Cong.,
2nd sess., September 14, 2006, 109-1081 (Washington: GPO, 2009).
37 Diana B. Henriques, "Basic Training Doesn't Guard Against Insurance Pitch to G.I.'s," New York Times, July 20,
2004.
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Regulating Commercial Solicitations on Military Installations; the Military
Personnel Financial Services Protection Act
In 2005, a congressionally requested study by the Government Accountability Office (GAO),
documented evidence of improper or misleading sales practices by insurance companies on and
around military installations.38 In particular, it found that some companies and agents were
targeting junior servicemembers for high-cost life insurance and other financial products.39
Sometimes these activities violated DOD solicitation policies or were offered under the guise of
independent “benefits counseling” from military fraternal organizations that were receiving
incentive payments for sales.40 Finally, GAO noted a lack of data-sharing between DOD and
financial regulators that handicapped their regulatory oversight and enforcement.
Shortly after GAO published its report, Congress passed the FY2006 National Defense
Authorization Act (NDAA), which included a section on “Consumer Protection Matters” for
military servicemembers.41 This was followed in September 2006 by the Military Personnel
Financial Services Protection Act (MPFSPA, P.L. 109-290) “to protect members of the U.S.
Armed Forces from unscrupulous practices regarding sales of insurance, financial, and
investment products.”42 Both these laws sought to increase regulation of the sale of life insurance
and other securities on military installations.
The MPFSPA mandated certain disclosures with the sale of these products, including that “the
securities offered are not being offered or provided by the broker or dealer on behalf of the
Federal Government, and that its offer is not sanctioned, recommended, or encouraged by the
Federal Government.”43 It also prohibited individuals who were not associated with a registered
broker or dealer from receiving incentive payments for referrals and required the Secretary of
Defense to “maintain a list of the name, address, and other appropriate information relating to
persons engaged in the business of securities or insurance that have been barred or otherwise
limited in any manner that is not generally applicable to all such type of persons, from any or all
military installations of the United States, or that have engaged in any transaction that is
prohibited by this Act.”44
The FY2006 NDAA provisions required DOD to create or modify policies for personal
commercial solicitations on military installations and to improve financial literacy for
servicemembers and their families (see “Financial Literacy and Counseling”)45 Section 579 of the

38 U.S. Government Accountability Office, Financial Product Sales, GAO-06-23, November 2005.
39 As part of military servicemembers’ benefits package, each member is eligible for inexpensive life insurance
coverage under Servicemembers’ Group Life Insurance (SGLI). See CRS Report R41435, Veterans’ Benefits: Current
Life Insurance Programs, by Heather M. Salazar.
40 Ibid. In December 2002, DOJ announced a settlement against an insurance company that targeted military members
whose agents had misrepresented themselves solely as employees of a benefits association. This company had allegedly
defrauded military servicemembers who purchased life insurance policies from the company by having its agents pose
as independent and objective counselors representing a nonprofit fraternal organization. However, the company’s agents
allegedly failed to disclose to the servicemembers that they were compensated through commissions from the insurance
company, and that the company was making undisclosed payments to the benefits association for every policy sold.
Settlement Agreement, United States, v. Academy Life Insurance Co., U.S. Dist. Ct., E.D. Pa., Civil Action No. 02-9215
(Dec. 10, 2002).
41 P.L. 109-163, Title V, Subtitle I.
42 This act also amended the Securities Exchange Act of 1934 and the Investment Advisers Act of 1940.
43 P.L. 109-290 §5.
44 Ibid., §13.
45 DOD, Report on Predatory Lending Practices Directed at Members of the Armed Services and Their Dependents,
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act also required DOD to prepare a report for Congress on “predatory lending practices directed
at members of the Armed Forces and their families.”46 Congress, in this law, described a
predatory lending practice as an unfair or abusive loan or credit sale transaction or collection
practice.
Regulating Consumer Credit for Servicemembers; the Military Lending Act
In August 2006, DOD released its congressionally mandated Report on Predatory Lending
Practices Directed at Members of the Armed Forces and Their Dependents.47 In this report, DOD
described predatory practices as the use of affinity or deceptive marketing techniques to target
primarily young and inexperienced military for the sale of high-fee/interest rate, short-term, or
installment loans.48 Examples referenced included payday, auto-title, and tax refund anticipation
loans—some with a combination of interest rates and fees in excess of a 100% annual percentage
rate (APR).49 DOD case studies found that members who took out these types of loans struggled
with cycles of “debt, family problems, difficulty maintaining personal readiness and a tarnished
career.”50 Given the findings in this report, DOD called for congressional action to regulate the
conditions for sale of certain consumer credit products to military servicemembers, including
capping the loan APRs at a 36% maximum, requiring transparent disclosures of loan rates, and
prohibiting loan provisions that require members and their dependents to waive legal rights as a
condition of the loan.51
At the time of DOD’s report publication, several related proposals had already been introduced in
the 109th Congress and were being considered as part of the NDAA process.52 In October 2006,
Congress enacted the Military Lending Act (MLA, 10 U.S.C. §987) under Title VI, Subtitle F of
the John Warner National Defense Authorization Act for Fiscal Year 2007 (FY2007 NDAA).53
The MLA regulates lending practices and products offered to military servicemembers and their
dependents. It prescribes limitations on terms for consumer credit extended to covered
servicemembers and dependents and bans certain lending practices. Under this law, creditors may
not exceed an annual percentage rate of 36% interest on consumer credit, and must provide
specific disclosures about loan rates (e.g., statement of the APR and clear description of payment
obligations). DOD implements the provisions of this act and the Consumer Financial Protection
Bureau and other bank regulators enforce the MLA, as well as other consumer protection laws
and regulations.54

August 9, 2006.
46 P.L. 109-163.
47 DOD, Report on Predatory Lending Practices Directed at Members of the Armed Services and Their Dependents,
August 9, 2006.
48 For more background on short-term, small-dollar lending markets, see CRS Report R44868, Short-Term, Small-
Dollar Lending: Policy Issues and Implications, by Darryl E. Getter.
49 DOD, Report on Predatory Lending Practices Directed at Members of the Armed Services and Their Dependents,
August 9, 2006, p. 20. An annual Percentage Rate (APR) is a measure of the total cost of credit, that generally includes
both the interest rate and fees associated with a loan.
50 Ibid. p. 39.
51 Ibid. pp. 50-51.
52 CRS In Focus IF10515, Defense Primer: The NDAA Process, by Valerie Heitshusen and Brendan W. McGarry.
53 P.L. 109-364.
54 For more on the CFPB, see CRS In Focus IF10031, Introduction to Financial Services: The Consumer Financial
Protection Bureau (CFPB), by Cheryl R. Cooper and David H. Carpenter.
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The MLA gave DOD rulemaking authority to determine the scope of the law as it applied to
various credit products. The MLA regulations went into effect on October 17, 2007, and covered
a limited range of closed-end credit products (e.g., payday, auto-title, and tax refund anticipation
loans). As these regulations were implemented, consumer advocacy groups argued that the
narrow definition of consumer credit products did not provide adequate protections for military
servicemembers. During Senate hearings in 2013, witnesses stated that better MLA rules and
enforcement were needed because lenders were finding ways to structure loans to circumvent
consumer protections.55
Congress subsequently amended the MLA in sections 661-663 of the FY2013 NDAA.56 Among
other things, this legislation required DOD to conduct regular reviews of the regulations. The
conference report accompanying the bill directed DOD to conduct a study to determine if changes
to the 2007 rules were necessary.57 The resulting DOD study in 2014 found that the limited
definition of consumer credit in the 2007 rules allowed for marketplace adaptations that
weakened the intended protections for servicemembers and their families. In September 2014,
DOD published a proposal to amend its MLA regulation, and on July 22, 2015, published its final
rules implementing the MLA.58
Whereas the rules previously defined a narrow set of products, the new rules applied to a broader
range of closed-end credit products (e.g., fixed term loans) and also extended regulations to open-
end products (e.g., credit cards), thereby affecting a larger number of businesses offering these
products. The new rules also included a safe-harbor provision for creditors to verify that an
individual is a covered borrower through one or both of the following mechanisms (1)
electronically through the Defense Manpower Data Center (DMDC) MLA database, and/or (2) a
report from a nationwide consumer reporting agency. The rules required lender compliance for
consumer credit established on or after October 3, 2016, and for credit card accounts under an
open-ended consumer credit plan on or after October 3, 2017.
Covered individuals under the MLA include
 Servicemembers on active duty,
 Reserve Component members serving on active duty under a call or order that
does not specify a period of 30 days or less, or such a member serving on Active
Guard and Reserve duty as that term is defined in 10 U.S.C. §101(d)(6),
 The spouse of a covered member,
 The child of a covered member, as child is defined in 38 USC §101(4), and
 An individual for whom the member provided more than one-half of the
individual's support for 180 days immediately preceding an extension of
consumer credit covered by 32 C.F.R. Part 232.

55 Consumer Financial Protection Bureau, Office of Servicemember Affairs, Testimony of Hollister K. Petraeus before
the U.S. Senate Committee on Commerce, Science & Transportation, November 20, 2013.
56 P.L. 112-239
57 This amendment also included a civil liability provision that would permit a covered borrower to recover damages
from any creditor violating a requirement of the MLA and authorized the agencies specified in the Truth in Lending
Act (TILA), as amended, to enforce those requirements.
58 Department of Defense, "Limitations on Terms of Consumer Credit Extended to Service Members and Dependents,"
80 Federal Register 43560-43612, July 22, 2015.
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DMDC portal for MLA Verification of Covered Members
The Defense Manpower Data Center (DMDC) provides a data portal for creditors to verify applicant eligibility
under Military Lending Act provisions (https://mla.dmdc.osd.mil/mla/#/home). Creditors may submit a single
record request or batch record request to DMDC and if verified wil receive a certificate as evidence of an
individual's active duty status in the U.S. Military, Reserve, or Guard. This certificate is also called the “Status
Report Pursuant to Military Lending Act.”
Information that must be submitted to verify an applicant’s eligibility includes the individual’s Social Security
Number (SSN) or Individual Taxpayer Identification Number (ITIN), birth date, and last name.
Limitations on Debt Liability: the Servicemembers Civil Relief Act
Congress has taken action to limit or suspend creditors’ legal liability under certain conditions,
due to the unique nature of military service. One such effort is the Servicemembers Civil Relief
Act (SCRA) of 2003, as amended.59 The purpose of this act is
(1) to provide for, strengthen, and expedite the national defense through protection
extended by this chapter to servicemembers of the United States to enable such persons to
devote their entire energy to the defense needs of the Nation; and
(2) to provide for the temporary suspension of judicial and administrative proceedings and
transactions that may adversely affect the civil rights of servicemembers during their
military service.60
Among other things, the SCRA provides servicemember protections against rental property
evictions, mortgage foreclosures, insurance cancellations, and government property seizures to
pay property tax assessments.61 The SCRA applies to
 Active duty members of the Army, Navy, Marine Corps, Air Force, Space Force,
and Coast Guard,
 Active duty commissioned officers of the Public Health Service or the National
Oceanic and Atmospheric Administration,
 Members of the Reserve Component on active duty, and
 Members of the National Guard when mobilized for more than 30 consecutive
days under section 502(f) of title 32 for purposes of responding to a national
emergency declared by the President and supported by Federal funds.62
With respect to indebtedness, the SCRA caps the maximum interest on prior debt incurred by the
servicemember or jointly with the member’s spouse at 6% a year. It does not apply to loans that
are assumed while on active duty. This reduced rate applies to credit card debts, car loans,
business obligations, student loans, and some other debts, fees, and service charges. The 6% cap
applies during the period of active service. In the case of mortgages, the cap applies for the
duration of active duty and for one year following discharge or deactivation.

59 50 U.S.C. §3901 et. seq. The SCRA amended and renamed the Soldiers’ and Sailors’ Civil Relief Act (SSCRA) of
1940.
60 50 U.S.C. §3902.
61 For the full scope of protections, see CRS Report R45283, The Servicemembers Civil Relief Act (SCRA): Section-by-
Section Summary, by Jennifer K. Elsea.
62 For more on mobilization authorities, see CRS Report RL30802, Reserve Component Personnel Issues: Questions
and Answers, by Lawrence Kapp and Barbara Salazar Torreon.
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Servicemember Redress for SCRA Violations
If a servicemember believes that his or her SCRA rights have been violated, there are several options to seek
redress:

Seek advice from a local military legal assistance office,63

Contact state attorney general,64

File a complaint with the Department of Justice’s Office of Civil Rights,65 and/or

Submit a complaint about a financial product or service with the Consumer Finance Protection Bureau (see
“The Role of the Consumer Financial Protection Bureau (CFPB)”).66
Financial Literacy and Counseling
Military servicemembers may make a number of significant decisions about their finances and
military benefits throughout their career that can affect their household financial well-being.
Some of these decisions may include how much to contribute to military retirement savings, or
whether to use veteran benefits to secure a mortgage or invest in education.67 In addition,
servicemembers navigate the market for credit, loans, and other financial products just as civilian
consumers do.68 Over the past few decades, technological changes and other market innovations
have led to a more complex range of financial products on offer to consumers.69 This has, in turn,
created a need for better financial literacy, often defined as “skills, knowledge, and tools that
equip people to make individual financial decisions and actions to attain their goals.”70 DOD
provides financial education programs and counseling to assist servicemembers in making
informed decisions about pay and benefits, improving their financial management skills, and
enhancing their financial well-being.
Financial Literacy Training
Financial literacy training requirements, as originally enacted by the FY2006 NDAA, are outlined
in Section 992 of Title 10, United States Code. Mandatory training topics include common private
sector financial services71 and marketing practices, and practices that are “particularly prevalent at

63 Under 10 U.S.C. §1044, military servicemembers are eligible for legal counsel from military lawyers for personal
civil legal affairs. For locations and contact information, see for example https://legalassistance.law.af.mil/.
64 See, https://www.naag.org/find-my-ag/.
65 See, https://civilrights.justice.gov/report/.
66 See, https://www.consumerfinance.gov/complaint/.
67 For more information on veteran housing and education benefits, see CRS Report R42504, VA Housing: Guaranteed
Loans, Direct Loans, and Specially Adapted Housing Grants, by Libby Perl, and CRS Report R42785, Veterans’
Educational Assistance Programs and Benefits: A Primer, by Cassandria Dortch.
68 For background on financial literacy and financial education for all consumers, see CRS Report R46941, Financial
Literacy and Financial Education Policy Issues, by Cheryl R. Cooper.
69 Annamaria Lusardi, “Financial literacy and the need for financial education: evidence and implications,” Swiss
Journal of Economics and Statistics, January 24, 2019.
70 U.S. Financial Literacy and Education Commission, U.S. National Strategy for Financial Literacy 2020, 2020,
https://home.treasury.gov/system/files/136/US-National-Strategy-Financial-Literacy-2020.pdf.
71 The law defines financial services as, “(1) Life insurance, casualty insurance, and other insurance, (2) Investments in
securities or financial instruments, (3) Banking, credit, loans, deferred payment plans, and mortgages, and (4) Health
insurance, budget management, Thrift Savings Plan (TSP), retirement lump sum payments (including rollover options
and tax consequences), and Survivor Benefit Plan (SBP).
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that military installation and in the vicinity.”72 Training on financial services and consumer
protections available to servicemembers under other sections of law is also required.
Between 2013 and 2015, military financial literacy requirements and implementation were
revisited in studies conducted by the Military Compensation and Retirement Modernization
Commission (MCRMC).73 The MCRMC found that “existing financial literacy programs do not
adequately educate servicemembers and their families on financial matters.”74 It recommended
amendments to 10 U.S.C. §992 to increase frequency and enhance content of financial literacy
training. Congress enacted these recommended changes in the FY2016 NDAA (P.L. 114-92 §661)
alongside significant changes to the military retirement system.75 These amendments required
financial literacy training at several points during a servicemember’s career (see shaded text box
below).
DOD policy identifies certain learning objectives and the points in a member’s career at which
each objective should be met. For example, an initial entry learning objective is to “analyze the
implications and identify strategies for financing a major purchase” and a pre-deployment
learning objective is to “examine the impact of special pay and entitlements”.76
When Financial Literacy Training is Required under 10 U.S.C. §992
DOD is required to provide financial literacy training during “periodically recurring required training” and at
various touchpoints/significant life events in a servicemember’s career. These events include

During initial entry training,

Upon arrival at first duty station and every subsequent duty station (for members in enlisted pay grades of E-
4 or below and officers in the pay grade of O-3 or below),

On the date of promotion of the member (for members in enlisted pay grades of E-5 or below and officers in
the pay grade of O-4 or below),

At each major life event during the member’s service, such as marriage, divorce, birth of a first child, or
disabling sickness or condition,

During leadership training, and

At transition points from a regular component to a reserve component and when separating or retiring from
service.

72 10 U.S.C. §992.
73 The FY2013 NDAA (P.L. 112-239) established the Military Compensation and Retirement Modernization
Commission with a mandate to review the military compensation and retirement systems and make recommendations
to modernize these systems. Section 1008(b) of Title 37 United States Code, requires the President to conduct a review
of military compensation every four years. Per a January 9, 2015 White House memorandum the MCRMC study
fulfills the requirement for the 12th Quadrennial Review of Military Compensation (QRMC). President Barack Obama,
Memorandum for the Secretary of Defense on the Twelfth Quadrennial Review of Military Compensation, January 9,
2015.
74 United States. Military Compensation and Retirement Modernization Commission MCRMC. United States, 2015.
Web Archive. Retrieved from the Library of Congress, p. 47.
75 The FY2016 NDAA (P.L. 114-92 §661) retitled this 10 U.S.C. §992 “Financial literacy training: financial services”
from the prior title “Consumer education: financial services”. For more background on the military retirement system,
see CRS Report RL34751, Military Retirement: Background and Recent Developments, by Kristy N. Kamarck.
76 Office of the Under Secretary of Defense for Personnel and Readiness, Directive-type Memorandum (DTM) 19-
009—Financial Readiness Common Military Training Requirements, August 13, 2019, Table 1, pp. 11-12.
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In addition, those servicemembers who are subject to the Blended Retirement System77 have required financial
training

When the member vests in the Thrift Savings Plan (TSP)78, and

When the member becomes entitled to receive continuation pay.79
The frequency of qualifying events (e.g., change of station, promotion) provides some assurance
that servicemembers will be exposed to financial literacy training several times in their first
decade of service. Nevertheless, the effectiveness of training can depend on its implementation,
which is the responsibility of the Secretaries of the military departments as part of military family
readiness programs.80 DOD policy gives the Secretaries discretion on the method of delivery used
for these trainings, and allows flexibility to include web- or computer-based training, instructor-
led training, or structured self-development.81 Curricula may also be tailored by service; however,
DOD specifies that some courses must follow a standard curriculum. These include courses
related to benefit elections under Blended Retirement System, and a course called “Financial
Planning for Transition” as part of the Transition Assistance Program (TAP).82
Section 594 of the FY2020 NDAA included a provision that required the Secretary of Defense
and the Secretary of Homeland Security (for matters related to Coast Guard personnel) to conduct
a study on the best practices to provide financial literacy education for separating members of the
Armed Forces. The provision requires the Secretaries concerned to consult with the Financial
Literacy and Education Commission of the Department of the Treasury and to submit a report to
Congress within 120 days of enactment of the law.
Financial Counseling Services
Section 992 of Title 10 U.S. Code requires DOD to provide certain financial counseling services
to servicemembers and their spouses. The law requires installations with 2,000 or more
servicemembers assigned to provide a full-time financial services counselor. Those employed as
counselors may be uniformed military, federal government civilians, contracted personnel, or
qualified representatives of nonprofit organizations through agreements with DOD. Military
counselors are required to be in the rank of E-7 or above. In all cases, counselors are required to
be “free from conflicts of interest” in the provision of financial services counseling. This

77 This includes all servicemembers who entered service on or after January 1, 2018, and certain eligible members who
were already in service and opted into the Blended Retirement System. See CRS Report RL34751, Military Retirement:
Background and Recent Developments, by Kristy N. Kamarck.
78 For more information on the TSP, see CRS Report RL30387, Federal Employees’ Retirement System: The Role of
the Thrift Savings Plan, by Katelin P. Isaacs.
79 Continuation pay is a direct cash payment available to servicemembers covered under the Blended Retirement
System, payable between completion of 8 and 12 years of service with a commitment of a minimum of 3 additional
years of service.
80 DOD, Military Family Readiness, DoDI 1342.22, August 4, 2021, p. 16. Office of the Under Secretary of Defense
for Personnel and Readiness, Directive-type Memorandum (DTM) 19-009—Financial Readiness Common Military
Training Requirements, August 13, 2019, p. 6.
81 Ibid., p. 9.
82 TAP counseling requirements are specified in 10 U.S.C. §1142(b) and include “(9) Financial planning assistance,
including information on budgeting, saving, credit, loans, and taxes.” See also, DOD, Transition Assistance Program
for Military Personnel, DODI 1332.35, September 26, 2019.
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requirement is largely in response to past instances of “counselors” serving a dual-hatted role as
agents or employees of financial services companies.83
DOD regulations require the military services to offer one-on-one personal financial management
counseling services.84 These services are offered in-person at Military and Family Support
Centers (MFSCs) located on the installations and, virtually, through the Military OneSource
website.85 According to DOD policies the MFSCs are required to offer
proactive personal life cycle financial management services that provide servicemembers
and their families with the tools and information they need to develop individual strategies
to achieve financial goals and address financial challenges. Information shall address the
effects of financial decisions on personal and professional lives, resources needed to make
prudent consumer decisions, and related services and support.86
Military OneSource is DOD’s one-stop web portal for information, resources, and counseling
services related to military life. The website’s content is mostly available to the general public
while counseling services by phone, video, or text chat are available for military personnel, their
family members and veterans for up to one year post-service.87 Counseling services include
income tax filing support, help accessing emergency financial assistance, and guidance for estate
planning.
The Role of the Consumer Financial Protection
Bureau (CFPB)
The Consumer Financial Protection Bureau plays a role in military financial literacy programs
and in oversight of servicemember consumer financial protections. Created in 2010, the Dodd-
Frank Wall Street Reform and Consumer Protection Act (Dodd-Frank Act) created an Office of
Servicemember Affairs (OSA) within the CFPB with the statutory authority to
 educate and empower servicemembers and their families to make better informed
decisions regarding consumer financial products and services,
 monitor complaints by servicemembers and their families and responses to those
complaints, and
 coordinate efforts among Federal and State agencies, as appropriate, regarding
consumer protection measures relating to consumer financial products and
services offered to, or used by, servicemembers and their families.88

83 See for example discussion in Department of Defense, Insurance Solicitation Practices on Department of Defense
Installations, Final Report, May 15, 2000, p. 3.
84 DOD, Military Family Readiness, DODI 1342.22, April 11, 2017.
85 Military Onesource, at https://www.militaryonesource.mil/financial-legal/personal-finance/personal-finance-
resources.
86 DOD, Military Family Readiness, DODI 1342.22, April 11, 2017.
87 The FY2019 NDAA (P.L. 115-232) extended veteran eligibility for Military OneSource services from 180 to 365
days.
88 P.L. 111-203 §1013(e), 12 U.S.C. §5493. For more on the CFPB, see https://www.consumerfinance.gov/consumer-
tools/educator-tools/servicemembers/, and CRS In Focus IF10031, Introduction to Financial Services: The Consumer
Financial Protection Bureau (CFPB), by Cheryl R. Cooper and David H. Carpenter.
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OSA coordinates with DOD and other federal agencies, such as the Federal Trade Commission,
Federal Reserve Board, and Internal Revenue Service, on outreach and education programs for
military families.89
OSA financial education programs seek to inform servicemembers and families about their legal
rights and avenues for redress under the SCRA, MLA, and other financial authorities. OSA has
developed an online interactive money management program available to servicemembers, their
families and those in pre-enlistment and commissioning programs (e.g., Reserve Officer Training
Corps, and Delayed Entry Program). OSA also provides other education programs for
stakeholders such as military financial counselors, veteran service organizations, and state
agencies.
For 2020, the CFPB received over 40,800 complaints from servicemembers about consumer
financial products, an increase of 14% from the previous year.90 A majority of these complaints
were related to credit or consumer reporting, debt collection, and mortgages. The CFPB has
reported that servicemembers submit complaints about debt collection practices at a higher rate
than non-servicemembers.91 Some of debt collection practices that members experience include,
contacting or threatening to contact the member’s commanding officer, attempts to collect debts
not owed, and threats of disciplinary action under the Uniform Code of Military Justice (UCMJ).
Legislation in the 117th Congress, the Fair Debt Collection Practices for Servicemembers Act,
would seek to address some of these issues.92
Other Financial Support for Military Families
In addition to the consumer protections discussed in this report, military servicemembers and
their families are also eligible for some need-based direct financial support from DOD and
military/veteran-serving nonprofit organization.
Family Subsistence Supplemental Allowance (FSSA)
In 2000, some Members expressed concerns about the number of military servicemembers
“believed to be relying on food stamps to meet the nutritional needs of family members.”93 In the
National Defense Authorization Act for FY2001, Congress added a requirement for DOD to
provide a supplemental subsistence allowance for low-income members.94 The FSSA was initially
established as a five-year program to provide a maximum of $500 monthly direct financial
support to raise a family’s income above that which would make them eligible for food stamps
(now known as the Supplemental Nutrition Assistance Program, or SNAP).95 Eligibility for the
FSSA benefit depends on household income and household size. It requires servicemembers to

89 Consumer Financial Protection Bureau, Office of Servicemember Affairs Annual Report; January 1-December 31
2020, May 2021, https://files.consumerfinance.gov/f/documents/cfpb_osa-annual-report-2020.pdf.
90 Ibid. p. 12.
91 Ibid., p. 18. For more information on debt collection, see CRS Report R46477, The Debt Collection Market and
Selected Policy Issues, by Cheryl R. Cooper.
92 H.R. 1491. This legislation was passed in the House on April 20, 2021.
93 U.S. Congress, House Committee on Armed Services, 106th Cong., 2nd sess., H.Rept. 106-616, p. 376. The report
cited 6,300 as the number of servicemembers believed to be relying on food stamps.
94 P.L. 106-398 §604, codified under 37 U.S.C. 402a.
95 For more information on SNAP eligibility, see CRS Report R42505, Supplemental Nutrition Assistance Program
(SNAP): A Primer on Eligibility and Benefits, by Randy Alison Aussenberg.
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apply for certification of eligibility and for recertification on an annual basis, or if a qualifying
event occurs (e.g., promotion, permanent change of station, increase in household income).96
The FSSA law was subsequently amended to make the authority permanent in 2006 (P.L. 109-
364) and to raise the maximum amount of assistance to $1,100 in 2009 (P.L. 111-84). In 2015, the
Military Compensation and Retirement Modernization Commission (MCRMC) examined
servicemember eligibility for food and nutrition assistance programs and found that very few
servicemembers were participating in the FSSA program (a total of 285 participants in
FY2013).97 In addition, they deemed the FSSA “duplicative” and “less generous” in many cases
than SNAP benefits. The Commission also highlighted feedback from military families that there
was a stigma associated with requesting FSSA through military channels, whereas applying for
SNAP does not typically involve the chain of command. The Commission recommended
restricting FSSA only to servicemembers in overseas locations where no SNAP assistance was
available.98 Congress enacted this restriction in the FY2016 NDAA.99
Basic Needs Allowance
In the Fiscal Year 2022 NDAA, Congress authorized a new pay allowance called the “Basic
Needs Allowance.”100 This payment is authorized for certain servicemember households with
dependents (spouse and/or child(ren)) in which “the gross household income of the member
during the most recent calendar year did not exceed an amount equal to 130 percent of the
Federal poverty guidelines of the Department of Health and Human Services for the location of
the member and the number of individuals in the household of the member for such year.”101 This
law requires the Secretary of Defense to conduct a screening at initial entry for servicemembers
and “regularly thereafter.” This authority goes into effect on December 27, 2022 and expires on
December 31, 2027. Prior to the implementation of this allowance, the law requires DOD to
conduct a study and brief the Armed Services Committees on issues related to servicemember
food insecurity by April 1, 2022. Follow-on reports on the implementation of the law are required
in 2025 and 2027.
Those most likely to meet this income threshold are junior enlisted servicemembers with non-
income earning spouses and dependent children (see Table 1 and earlier discussion of
servicemember pay).102 DOD initial entry policy requires enlistment waivers for single
parenthood or for married individuals with several children.103 The impact of this new allowance
could be fewer waivers granted by the services for applicants with dependents.

96 DOD, Family Subsistence Supplemental Allowance (FSSA) Program, DODI 1341.11, March 4, 2008.
97 Report of the Military Compensation and Retirement Modernization Commission, Final Report, January 2015, p. 7.
98 Ibid.
99 P.L. 114-92 §602.
100 P.L. 117-81 §601.
101 “Gross household income” is defined as all household income, derived from any source; minus any portion of the
basic allowance for housing under section 403 of title 37, U.S. Code that the relevant Secretary elects to exclude for
members in high cost-of-living locations. For more information on federal poverty guidelines, see CRS Report R44780,
An Introduction to Poverty Measurement, by Joseph Dalaker.
102 Cadets and midshipmen at the military service academies are ineligible for this allowance.
103 Law and policy establish certain entry standards for servicemembers based on, for example, medical conditions, past
misconduct, and dependency status. According to 32 C.F.R. § 66.7(2). “A dependent waiver is required when an
applicant is married with more than two dependents under the age of 18 or when an applicant is unmarried and has
custody of any dependents under the age of 18.”
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Financial Support during National Crises
At certain times of national crises or economic downturn, Congress has authorized financial
support to military servicemembers who are adversely affected. DOD has also used existing
flexibilities in military pay authorities to support servicemembers affected by these events. Two
examples of are the expansion of the Homeowner’s Assistance Program during the 2008 financial
crisis, and DOD’s response to the COVID-19 pandemic in 2020.
Expansion of Homeowner’s Assistance Program
This program, initially authorized in 1966 (P.L. 89-754), was expanded as part of the American
Recovery and Reinvestment Act of 2009 to respond to the nationwide mortgage foreclosure and
credit crisis.104 This act amended an existing statute associated with the loss of real estate property
value due to base realignment and closure (BRAC) activity.105 The 2009 law authorized DOD to
“acquire title to, hold, manage, and dispose of, or, in lieu thereof, to reimburse for certain losses
upon private sale of, or foreclosure against, any property improved with a one- or two-family
dwelling situated at or near a military base or installation” under the conditions that the property
was owned by and the private residence of a servicemember who was permanently reassigned and
compelled to sell the home between July 1, 2006, and September 30, 2012. Another provision of
this law authorized the same housing assistance for military servicemembers who incurred a
disability of 30% of or more from a deployment-related injury or illness, and were reassigned for
“furtherance of medical treatment, rehabilitation, or due to medical retirement resulting from the
sustained disability.”
COVID-19 Pandemic
DOD also used existing flexibilities in statute to help military families facing financial hardships
during the COVID-19 pandemic. Starting in 2020, the Department authorized a series of special
pays and allowances for servicemembers who were adversely impacted by quarantine
requirements or travel restrictions. One of these was the extension of hardship duty pay under 37
U.S.C. §305. This statute provides discretionary authority to the Secretary of Defense to
designate certain types of duty as “hardship duty” and allows the Secretary to pay an eligible
member up to $1,500 per month. Starting in March 2020, servicemembers who were ordered to
self-monitor in isolation due to COVID-19 exposure or infection were eligible for hardship duty
pay-restriction of movement (HDP-ROM).106 Servicemembers were eligible for a taxable payment
of $100 per day if they were ordered to isolate somewhere other than at their home or a
government-funded lodging facility.
Nongovernmental Direct Financial Assistance
Servicemembers who face financial difficulties have some military-specific options available to
them for direct relief. DOD reports that servicemembers generally have access to low-cost loans
through banks and credit unions operating on military bases. Other military and veteran-serving
nonprofit organizations also provide direct financial assistance to families facing emergency

104 P.L. 111-5, codified in 42 U.S.C. §3374.
105 CRS Report R45705, Base Closure and Realignment (BRAC): Background and Issues for Congress, by Christopher
T. Mann.
106 DOD, Fact Sheet: COVID-19 Military Personnel, Pay, and Benefits Policy, March 26, 2020.
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expenses (e.g., foreclosure or eviction, utility shut-offs).107 Each of the military departments and
the Coast Guard also have relief societies. The Armed Forces Relief Societies are nonprofit
organizations that provide financial counseling, education, and emergency financial assistance
through grants or interest-free loans to uniformed servicemembers, retirees, survivors and
military dependents. They include
 Army Emergency Relief (AER),108
 Navy-Marine Corps Relief Society (NMCRS)109,
 Air Force Aid Society,110 and
 Coast Guard Mutual Assistance.111
Interest-free loans issued by these societies are typically short-term (12 months) and range from
about $500-$2,000. This type of financial assistance can help members to manage unexpected
financial shocks, or to restructure debt.
Policy Issues for Congress
Congress and DOD have taken several actions through law and regulation to improve military
readiness, including enhancing military consumer protections, actions toward increasing the
financial literacy of servicemembers and dependents, and direct financial support to the lower
income or otherwise vulnerable families during times of need or national emergency. Congress
may consider the adequacy and equity of current programs and coverage, as well as the
appropriate consumer financial protections for servicemembers.
Financial Literacy Training: Saliency and Effectiveness
Just as the range of financial product offerings has expanded, so have the financial literacy
training offerings and the federal spending on such programs.112 In general, research suggests that
financial literacy training is correlated with positive credit behaviors (e.g., on-time bill payment),
better retirement planning and wealth accumulation, and overall financial well-being. Evidence is
limited as to whether financial literacy training is effective in increasing knowledge and shifting
behaviors for military servicemembers and households. In some cases, servicemember-specific
training has been associated with improvements in self-reported financial knowledge and
behavior relative to a comparison group.113 For example, a study of the U.S. Army's personal
financial management course for new enlistees found that it reduced credit delinquencies and debt
balances in the year following the course, and increased retirement savings rates for at least two

107 See for example, American Legion temporary financial assistance grants, at https://www.legion.org/
financialassistance, and The Enlisted Association of the National Guard of the United States at https://eangus-wcfa.org/
covid-19-loan-information/.
108 https://www.armyemergencyrelief.org/.
109 https://www.nmcrs.org/pages/our-history.
110 https://afas.org/.
111 https://www.cgmahq.org/.
112 U.S. Government Accountability Office, Financial Literacy: Overlap of Programs Suggests There May
Opportunities for Consolidation, GAO-12-588, July 2012, Table 1, p. 6.
113 Catherine Bell, Daniel Gorin, and Jeanne M. Hogarth, "Does Financial Education Affect Soldiers’ Financial
Behavior?," Networks Financial Institute, Indiana State University, August 2009.
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years afterwards.114 In this study, the effect of the course on adverse credit events did not persist
beyond the first year, suggesting that the current approach of requiring training at multiple career
milestones (as per 10 U.S.C. §992) may be effective for sustained impact.
Civilian research indicates that outcomes associated with financial education are sensitive to the
timing, method of delivery, and content, among other factors.115 There also is some research to
suggest that there are racial and gender differences in baseline financial knowledge and post-
training outcomes.116 These findings suggest that offering targeted or tailored training to various
military sub-populations might increase its effectiveness.117
Past government reports have also pointed to opportunities to consolidate federal efforts for
financial literacy training both across and within agencies to improve efficiency and oversight.
For example, a 2019 report from the Treasury Department recommended that DOD take the lead
on financial education activities for servicemembers and their families, while considering, “how
to reduce, consolidate or eliminate seemingly duplicative financial education activities among the
military services, including duplicative curricula.”118 This recommendation was adopted by the
Financial Literacy and Education Commission (FLEC) as part of U.S. National Strategy for
Financial Literacy 2020.119
Some have argued that the government should focus its financial literacy education efforts before
individuals enter the military, as part of K-12 education.120 There may other opportunities to
prepare those with an affinity or propensity for military service, through courses in Junior
Reserve Officer Training Corps (JROTC), Senior Reserve Officer Training Corps (SROTC), or
other recruiter outreach and intake programs (e.g., Delayed Entry Program (DEP)).121
Variations in Consumer Protection Coverage by Duty Status and
Dependency
One consideration for Congress whether the eligible population under military consumer
protection laws should be clarified or broadened. While active component (AC) members and

114 William Skimmyhorn, "Assessing Financial Education: Evidence from Boot Camp," American Economic Journal:
Economic Policy, vol. 8, no. 2 (May 2016).
115 Jamie Francis Wagner, “An analysis of the effects of financial education on financial literacy and financial
behaviors,” The University of Nebraska-Lincoln, 2015. Evan Davies and Perry Bolding, A Literature Review of the
Teaching Methods Used in Financial Literacy Education, Center for Faculty Excellence, United States Military
Academy, 2016. CRS Report R46941, Financial Literacy and Financial Education Policy Issues, by Cheryl R. Cooper.
116 Abdullah Al-Bahrani, Jamie Weathers, and Darshak Patel, “Racial Differences in the Returns to Financial Literacy
Education," The Journal of Consumer Affairs, vol. 52, no. 2 (June 7, 2018), pp. 572-599. Roger B. Butters, Carlos J.
Asarta, and Shannon G. McCoy, “Financial Literacy and Gender in U.S. High Schools” Journal of Economics and
Financial Education, vol. 11, no. 2 (Winter 2012), pp. 142-149.
117 For more on financial education best practices, see CRS Report R46941, Financial Literacy and Financial
Education Policy Issues, by Cheryl R. Cooper.
118 U.S. Department of the Treasury, Federal Financial Literacy Reforms; Coordinating and Improving Financial
Literacy Efforts, July 2019, p. 9. U.S. Government Accountability Office, Financial Literacy: Overlap of Programs
Suggests There May Opportunities for Consolidation, GAO-12-588, July 2012.
119 FLEC, U.S. National Strategy for Financial Literacy 2020, 2020, p. 13.
120 Jamie Gayton, "Military financial literacy improving, but it needs to start sooner," Fox Business News, April 30,
2019.
121 JROTC is offered in 8th grade through 12th grade in some schools. See CRS In Focus IF11313, Defense Primer:
Junior Reserve Officers’ Training Corps (JROTC), by Kristy N. Kamarck, and CRS In Focus IF11235, Defense
Primer: Senior Reserve Officer Training Corps, by Kristy N. Kamarck.
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their dependents are always covered by the SCRA and MLA, coverage for reserve component
(RC) members is often contingent on their duty status (see Table 2). For members of the RC,
MLA eligibility may be conditioned on the amount of time served on active duty. Dependent
eligibility for certain protections is also variable, as these acts rely on dependency definitions
from different sections of code. For example, the MLA has more expansive coverage for
dependents, including un-remarried former spouses and widows/widowers as well as older
dependent children.
Variations in coverage and eligibility between the two laws can sometimes create a confusing
landscape for military families, and for providers of consumer credit. These issues can be
particularly challenging for RC members whose duty status changes more frequently and who
may not have the same level of access to financial counseling, education, or other forms of
installation-based support as their AC counterparts. In addition, coverage may lapse for certain
military servicemembers and families during times when they are at the highest risk for financial
shocks, for example, following the death of a servicemember, when transitioning out of the
military to veteran status, or when demobilizing from a reserve activation. From the financial firm
perspective, verifying eligibility by duty status can lead to additional administrative compliance
costs and delays in issuing credit.122 Congress may consider whether existing law covers the
intended population and if there are gaps in intended coverage based on duty status or
dependency.
Table 2. Variations in Benefit Coverage by Status
Active
Law
Component
Reserve Component
Dependents
SCRA
All
Reserves ordered to active duty Spouse
as defined under 10 U.S.C.
Dependent child(ren) as defined under 38 U.S.C.
101(d)(1).
§101(4), including
National Guard when under a

Child under the age of 18 (under age 23 for
call to active service authorized
ful -time student),
by the President or the
Secretary of Defense for a

Incapacitated child if incapacitation is prior
period of more than 30
to age 18.
consecutive days under section

An individual for whom the servicemember
502(f) of title 32 for purposes of
provided more than one-half of the
responding to a national
individual's support for 180 days immediately
emergency declared by the
preceding an application for relief.
President and supported by
Federal funds
MLA
All
Members on Active Guard and
Dependents as defined under 10 U.S.C. 1072(2),
Reserve duty or on active duty
including
for 30 days or longer.

Spouse

Un-remarried former spouse (if married for
20 years w/20 years of service),

Un-remarried widow/widower

Children under age 21 (under age 23 if ful -
time student),

Incapacitated child at any age,

Dependent parent or parent-in-law

122 Nick Rummell, “Pawnbrokers Say New Lending Law Is Ruinous,” Courthouse News Service, July 13, 2016.
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Source: CRS analysis of statute.
Notes: Under SCRA, a servicemember’s child is as defined under 38 U.S.C. §101(4). Dependent eligibility is
contingent on the duty status of the member.
Military-specific Consumer Financial Regulations
Over the past few decades, Congress has treated military servicemembers and their families as a
special category for consumer protections. This is largely due to the unique nature of military
work and the need to maintain individual and family readiness. Some lenders and advocates for
the consumer credit industry argue that MLA and other military-specific rules impose undue
regulatory burdens and compliance costs on their businesses.123 In addition, they note that the
rules limit access to credit, including the potential range of consumer credit products available to
servicemembers and family members, which could result in unmet needs and financial hardships
for those individuals.124
On the other hand, consumer and military advocacy groups see military-connected consumers as
a particularly vulnerable group in need of stronger financial market regulations, oversight, and
enforcement. These groups argue that regulatory initiatives like transparency in lending rates and
limits on interest rates can help servicemembers and their families make more informed and
better financial decisions. Some have also argued that these protections should not be limited to
military servicemembers and should be expanded to other civilian consumers.
One consideration might be whether certain protections should be expanded to veterans for a
certain period of time post-service. While post-service earnings vary based on military occupation
and years of experience, data suggests that, on average, servicemembers have lower earnings after
leaving the service compared with their final year of active duty.125 There is some evidence to
indicate that recently separated enlisted servicemembers struggle with financial stability,
including higher rates of debt delinquency and derogatory marks on their credit scores.126 This
may be due to post-service dips in income that make it more challenging for veterans to meet debt
obligations they incurred while in service. Compared to their civilian counterparts ages 18 to 24,
young servicemembers are more likely to have an auto loan or a credit card, and slightly more
likely to have a mortgage.127 As noted in Table 1, the annual earnings (RMC) for a single enlisted
Private First Class (E-3) with less than two years of service is about $50,000, while the Census
Bureau reports that average earnings for a veteran E-3 is $26,140 in the first year post-
discharge.128
Congress may consider these and other questions when developing military-specific policies and
programs.

123 Ibid.
124 See for example, Roxette Pietri-Freeman, "Law change creates GAP insurance confusion for military members,"
KTBS.com, October 27, 2019.
125 Charles Goldman et al., Navigating a Big Transition: Military Service Members Earnings and Employment After
Active Duty Service, RAND Corporation, Santa Monica, CA, 2021, at
https://www.rand.org/pubs/research_reports/RRA361-1.html.
126 CFPB, Debt and delinquency after military service: A study of the credit records of young veterans in the first year
after separation, Consumer education and empowerment, November 9, 2020.
127 CFPB, Financially Fit? Comparing the credit records of young servicemembers and civilians, Consumer education
and empowerment, July 14, 2020. This report notes that servicemembers are less likely than civilian counterparts to
have student loans while in the service.
128 United States Census Bureau, Veteran Employment Outcomes Explorer, Earnings for Employed Veterans by
Paygrade; 2014-2015 Exit Cohort, at https://lehd.ces.census.gov/applications/veo/service/paygrade/line.
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Military Families and Financial Readiness

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Military Families and Financial Readiness

Appendix. Selected Legislation
Table A-1. Selected Legislation
2003-2021
Year
Citation
Legislation Title and Description
2003
P.L. 108-136 National Defense Authorization Act for Fiscal Year 2004
Required congressional notification of amendment or cancellation of DOD directive
relating to reasonable access to military installations for certain personal commercial
solicitation. (repealed in 2005)

P.L. 108-189 Servicemembers Civil Relief Act (SCRA)
Amended the Soldiers' and Sailors' Civil Relief Act of 1940 (SSCRA)
2006
P.L. 109-163
National Defense Authorization Act for Fiscal Year 2006, Title V, Subtitle I,
Consumer Protection Matters
Required regulations on policies and procedures on personal commercial solicitations on
DOD installations.
Required consumer education for members of the Armed Forces and their spouses on
insurance and other financial services.
Required DOD report on predatory lending practices directed at members of the
Armed Forces and their dependents.

P.L. 109-290
Military Personnel Financial Services Protection Act
Modified regulatory requirements with respect to sales of certain securities on military
installations and to military servicemembers.
Required certain disclosure on the sale of life insurance products to members of the
Armed Forces.
Banned insurance agents and financial advisors who violate regulations from doing
business on military installations and required enhanced monitoring by DOD.
2007
P.L. 109-364 John Warner National Defense Authorization Act for Fiscal Year 2007
Enacted the Military Lending Act (MLA) with a cap on the interest rate, and other
restrictions on certain credit products marketed to military servicemembers.
2009
P.L. 111-5
American Recovery and Reinvestment Act of 2009
Expanded the Homeowners Assistance Program for certain military servicemembers.
2010
P.L. 111-203
Dodd-Frank Wall Street Reform and Consumer Protection Act (Dodd-
§1029(e)
Frank)
Created CFBP OSA and mandated a role for the agency in military financial education
and oversight of military consumer protections.
2012
P.L. 112-239 National Defense Authorization Act for Fiscal Year 2013
Amended the MLA.
2015
P.L. 114-92
National Defense Authorization Act for Fiscal Year 2016
Amended 10 U.S.C. §992 to require DOD to conduct an annual survey of the “status of
the financial literacy and preparedness of members of the armed forces,” and report to
the Armed Services Committees.
2021
P.L. 117-81
National Defense Authorization Act for Fiscal Year 2022
Authorized a “Basic Needs Allowance” from the Department of Defense for certain
servicemember households with dependents whose gross income is below 130% of the
federal poverty line.
Source: CRS analysis of legislation
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Military Families and Financial Readiness

Author Information

Kristy N. Kamarck

Specialist in Military Manpower

Disclaimer
This document was prepared by the Congressional Research Service (CRS). CRS serves as nonpartisan
shared staff to congressional committees and Members of Congress. It operates solely at the behest of and
under the direction of Congress. Information in a CRS Report should not be relied upon for purposes other
than public understanding of information that has been provided by CRS to Members of Congress in
connection with CRS’s institutional role. CRS Reports, as a work of the United States Government, are not
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