A Radical Regulatory Proposal
When it comes to laws and regulations around consumer credit, some policymakers, as the saying goes, seem intent on killing a fly by burning down the house. Sure, you address the issue, but consider all that ancillary damage.
That’s the point made in a recent op-ed by Jared Kaplan, CEO of OppFi, in the American Banker. As Kaplan notes, small dollar lending is a “vital lifeline” for more than 60 million American consumers. However, rate caps often harm the consumers they’re intended to help.
Kaplan also points out – rightly – that these proposals are being made with a flawed understanding of the consumer credit marketplace. Rather than hinder consumers’ access to even fewer credit options, he argues for broader adoption of the commonsense attributes of traditional installment loans: testing the consumers ability to repay, reporting payment history to credit bureaus, having fully-amortized payments, and doing away with balloon payments and prepayment penalties.
Now there’s a radical regulatory proposal: protecting consumers by allowing the consumer credit marketplace to serve them.
March 18th, 2021
