This piece was originally published in the Center Square.
The uncertainty rippling through America’s financial markets is a problem for many consumers. CNBC’s recent Financial Confidence Survey found that over 70% of Americans are feeling financially stressed, and fewer than half say they have an emergency savings fund.
Consumers living paycheck to paycheck have traditionally relied on small dollar loans to cover emergency expenses – from repairing home appliances to replacing car parts. Yet states across the country, most recently Illinois and New Mexico, passed legislation that drastically impacted the market – and availability – of these loan products.
In 2021, the Illinois state legislature imposed an all-in interest rate cap of 36 percent per year for loans under $40,000 from non-bank and non-credit union lenders, called the Predatory Lending and Prevention Act (PLPA). New Mexico passed a similar piece of rate cap legislation that went into effect this year.