Rate Cap Policies Would Decrease Access to Credit and Diminish Economic Inclusion

Four in ten Americans do not have enough savings to cover an unexpected expense of $400, according the Federal Reserve Board. With this alarming statistic, it stands to reason that policymakers would want to identify good public policy to improve access to credit for people who need it the most. Unfortunately, many well-intentioned policy ideas have the unintended consequence of harming the very people they aim to help. The policy goal should be to increase access to credit and to increase inclusion in the economy.

Improving Banking for Minority Businesses

For minority and women-owned businesses, accessing credit and growth capital is still an uphill battle. So much so that a bipartisan group of U.S. Senators has created the “Small Business Act,” designed to address the credit gap that exists for America’s most underserved populations. Unfortunately, proposed consumer finance laws may harm these communities in ways we don’t understand and render the Small Business Act useless.

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Unintended Consequences of Price Controls

Lawmakers in D.C. are considering consumer lending laws that would render products like U.S. Bank’s small-dollar Simple Loan illegal. Economists agree that the proposals may do more harm than good to America’s underbanked – mostly the young, minority communities, and rural families. Can these vulnerable communities afford yet another shock to their financial safety nets?

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Shoot First, Then Aim?

As the U.S. House Financial Services Committee begins scheduling for the fall, observers in the financial services community are wondering whether an interest rate cap bill is on the table. The only problem? The mountain of evidence suggesting that usury laws would harm America’s working class and minority communities. Some policy experts are urging the Federal Reserve Bank to study the impacts to these communities before new legislation is enacted, but will D.C. listen?

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