SAN FRANCISCO--(BUSINESS WIRE)--INSIKT, a CDFI-certified fintech company disrupting the predatory lending industry, today celebrated a major step forward for working families and small businesses in California with the signing of Assembly Bill 237 (AB237), following unanimous approval by the CA Legislature. Sponsored by Lorena Gonzalez Fletcher (D-San Diego), this new law significantly expands access to lower cost loans for Californians who are part of the 66 million underbanked in America ensnared in endless cycles of predatory debt.
This legislation brought together a coalition of responsible business advocates, organized labor, and Latino community leaders, all focused on the shared interest of expanding access to capital while also ending predatory lending practices.
“The overwhelming support for AB237 recognizes the urgent need to level the playing field for millions of underbanked Californians. Those who can least afford unexpected, emergency expenses, car repairs to get to work, family funerals, or legal fees for immigration purposes too often pay the most. With expanded access to affordable and credit building loans, Californians can escape the crushing debt that afflicts so many who have no alternative to predatory lending,” said Assemblywoman Lorena Gonzalez Fletcher.
AB237 builds on the success of California’s Pilot Program, established in California in 2010 to provide affordable credit for loans below $2,500. The Pilot Program has many consumer protections, including rate caps, mandated underwriting, credit education and reporting of payback information to credit bureaus so that consumers can build their credit score.
The Pilot Program has been working, with the volume of payday lending declining in California by almost 7% from last year, the third consecutive annual decline. AB237 extends all of the Pilot Program’s consumer protections to larger loans of up to $7,500. It also adds new protections, including a 36% maximum debt-to-income ratio, minimum loan terms of one year, and mandatory rate reductions on second and third loans for borrowers in good standing.
“This is a huge win for small businesses and families in California who deserve a much better alternative to predatory lending that is too often their only option,” said James Gutierrez, CEO and Co-Founder of INSIKT. “Lack of access to affordable capital stifles the potential growth of working families. This new law has built a bridge to help them establish a credit score and pursue their American Dream, and it will serve as a catalyst for other states to follow. Together, we can turn the tide against predatory lending and become a model of financial inclusion in America.”
INSIKT’s mission is to build financially healthy low-income communities and end reliance on predatory lenders by providing affordable credit to America’s 66-million underbanked and unbanked. Loans from Lendify, INSIKT’s Community Development Financial Institution (CDFI)-certified subsidiary are intentionally designed to help borrowers succeed at repayment and build good credit. 67% percent of its repeat customers grew their credit score by an average of 312 points when applying for a second loan. Currently available in more than 775 locations across California, Texas, Illinois and Arizona, INSIKT has provided hundreds of thousands of loans to low-income households since launching in 2014. Learn more at insikt.com.