Mary Jackson

Mary Jackson is chief executive officer of the Online Lenders Alliance, mjackson@oladc.org. She wrote this commentary for CALmatters.

Editor’s note: This commentary is in response to “State law and legislators fail California consumers on high-interest loans,” Feb. 4, 2019, by Tom Dresslar.

Working families feel the strain of making ends meet every day, making it hard to budget for unexpected expenses and other financial emergencies.

In fact, according to the Federal Reserve, four in 10 Americans wouldn’t be able to cover a $400 emergency expense; 38 percent of California households would be unable to cover basic livings costs for three months if they lost their income.

The threat of an expensive visit to the emergency room or an unexpected car repair is even more daunting for millions of Californians who don’t have a prime credit score. Even people with good wages may struggle to get a loan from a bank or a credit union, since non-prime lending by traditional institutions has fallen by $143 billion since 2008.

And more than half of consumers turning to California’s pilot program for small dollar loans are denied credit, often because of a thin or non-prime credit history.

Other options, such as overdraft fees can yield annualized interest rates of well over 1000 percent and can negatively impact customers’ credit.

Californians deserve access to safe, trustworthy credit when they need it. Having access to a range of well-regulated loan options helps soften financial shocks experienced by low- and moderate-income households.

That’s why the Online Lenders Alliance has championed regulations that protect consumers while preserving access to credit and has served as a watchdog to help ensure that reputable lenders and lead generators can serve California customers, while pushing out bad actors.

Lead generators play an important role in providing non-prime consumers access to credit.  If you’ve ever purchased a plane ticket on Priceline, booked a room through Trivago, or even shopped for car insurance online, you’ve probably done it with the help of a lead generator. They give consumers more choices, as well as tools to make more informed choices.

Last year, legislation to license lead generators failed because it didn’t adequately recognize the way in which modern lead generation works.

Lead generation, like many other Internet-based enterprises, only came into existence after California’s consumer finance laws were written and don’t fit neatly under current law.

Trying to regulate them like brokers–someone who arranges, negotiates and sells loans–is like trying to regulate companies such as Uber like taxis or Airbnb like hotels. Putting the brakes on the one-size-fits all approach now opens the opportunity to develop regulations that embrace technology while protecting consumers.

Together, online lead generators and lenders provide innovative financial services that reach Californians who aren’t being served by banks and credit unions. Ensuring laws are modernized, embrace innovation and protect consumers should be the Legislature’s top priority.