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Vast Majority of Credit-Challenged Consumers Remain Locked out of Traditional Credit Markets

Vast Majority of Credit-Challenged Consumers Remain Locked out of Traditional Credit Markets

According to OppLoans, a leading fintech firm, only 7.8% of applicants qualify for sub-36% APR loans from a consortium of near-prime lenders

 OppLoans, a leading financial technology platform that serves middle income, credit-challenged consumers, released its latest insights on sub-36% APR loan availability for non-prime consumers through the first month of 2020.

Through OppLoans’ proprietary TurnUp referral program – in which OppLoans checks the market voluntarily on behalf of applicants for sub-36% APR small dollar installment loans with approximately 15 near-prime lenders before presenting options through the OppLoans’ platform – the fintech firm is able to offer a window into how often credit-challenged applicants qualify for rates typically reserved for those with near prime credit scores.

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For the first month of 2020, 47,234 applicants across the nation opted into the OppLoans’ TurnUp program and only 7.8% – 3,666 consumers – qualified for sub-36% APR loans from the consortium of near-prime lenders. This percentage was relatively unchanged from December 2019, when 7.0% – 4,097 consumers – qualified for sub-36% APR loans through the program.  In addition, OppLoans reported that another 150,000 applicants applied in January after unsuccessfully seeking credit from at least one sub-36% APR lender.

California recently amended the California Finance Lender’s Law to limit the rate of interest to 36% plus federal funds rate (~2%) per annum for most consumer installment loans. Of the state’s 4,796 TurnUp applicants, only 9.8% qualified for a sub-36% APR loan. This, too, illustrated little change from December 2019 – prior to the rate cap – when 8.9% of the state’s 5,626 TurnUp applicants qualified for sub-36% APR loans.

Virginia, where the legislature is currently evaluating whether to impose a rate cap, continues to display similar loan access issues for the non-prime consumer, according to OppLoans. Of the 2,213 applicants that enrolled in the OppLoans’ TurnUp program in January 2020, just 9.1% would have qualified for a sub-36% APR loan through the consortium.

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“Our TurnUp referral program’s data shows that through the first month of 2020, the vast majority of credit-challenged Americans still can’t get access to traditional credit,” said Jared Kaplan, CEO, OppLoans. “What’s more concerning, in states that have passed rate caps of 36% APR or are considering doing so, access to loans below the 36% threshold remains at single-digit levels, illustrating the unintended consequences these rate caps have on credit access for consumers who need it the most. This is despite many sub-36% APR lenders claiming they will fill the gap when interest caps are legislated into effect.”

“Without access to more alternatives, few regulated options exist outside of bankruptcy court for these states with a statewide interest cap, a cap that was positioned to help consumers. Our data shows otherwise. OppLoans is committed to helping the tens of millions of middle-income consumers who are turned away by traditional providers to build a better financial path and graduate back to prime credit score levels,” Kaplan added.

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