SoLo Funds’ 2025 Cash Poor Report highlights a troubling reality: millions of Americans, including middle-class earners, live paycheck to paycheck, unable to handle even minor financial shocks. While policymakers claim to seek solutions to alleviate economic hardship, many proposals—particularly interest rate caps on small-dollar loans—are exacerbating the problem. Rate caps act as price controls on credit, distorting the free-market equilibrium and creating credit shortages that leave the most vulnerable consumers without options.
Research has long documented how credit restrictions hurt those most in need. No Loan For You! and No Loan For You, Too! examined the impact of interest rate caps in New Mexico and found that these regulations do not lower the cost of borrowing but eliminate access to credit for those who need it most. These findings align with the concerns raised by the Congressional Black Caucus Institute’s (CBCI) 2024 Annual Report, which underscores how state-by-state regulations and rate caps have forced responsible small-dollar lenders out of key markets, leaving millions unbanked and underbanked without access to financial lifelines.
Who Are America’s Cash Poor?
The 2025 Cash Poor Report paints a clear picture:
- The cash poor are not just the working poor—one in seven earns over $75,000 annually.
- They are disproportionately women (54%), and many hold full-time jobs.
- Unplanned expenses, like auto repairs, medical bills, and utility bills, are a primary cause of financial strain.
- Only 25% of cash-poor Americans can cover an unplanned expense with savings or a credit card.
Short-term lending options provide critical relief for these individuals, yet policymakers are systematically stripping away these choices by capping interest rates on small-dollar loans.
The Growing Savings Crisis and Its Impact on Credit Access
Bankrate’s 2025 Emergency Savings Report paints a dire picture of Americans’ financial vulnerability. According to Bankrate, only 41% of Americans could cover a $1,000 emergency expense with savings, down from 44% in 2024—marking the lowest level since 2021. This aligns closely with SPPI’s analysis, demonstrating that the ability to handle unplanned financial shocks is rapidly deteriorating, leaving millions dependent on borrowing.
Savings Shortfall Leads to Increased Borrowing
As emergency savings shrink, Americans are increasingly forced to borrow money for everyday financial crises:
- 43% of Americans now turn to credit cards (25%), family loans (13%), or personal loans (5%) to cover emergency costs.
- 27% of U.S. adults have no emergency savings at all, the highest percentage since 2020.
- 69% of Americans worry about covering their living expenses if they lose their job, with Gen Z (80%) and Millennials (72%) expressing the most concern.
- 36% of Americans now have more credit card debt than emergency savings, exposing them to high-interest financial distress.
Rate Caps: A Price Control on Credit
An interest rate cap is a form of price control—specifically, a cap on the price of borrowing. Economic theory and empirical evidence both demonstrate that when price controls are set below the natural market equilibrium, they create shortages.
Here’s how that plays out in small-dollar lending:
- Lenders cannot profitably issue loans at artificially low capped rates → they exit the market.
- Fewer lenders mean fewer loans available, creating a shortage of credit.
- The very people who need loans the most—those living paycheck to paycheck—are left without options.
SPPI’s No Loan For You! studies confirm this outcome in New Mexico, where the state’s 36% rate cap drove legitimate small-dollar lenders out of business. As a result, borrowers were forced to turn to more expensive, less transparent alternatives like overdrafts, pawn shops, and illegal lending networks. The Cash Poor Report echoes this, noting that when credit is restricted, borrowers resort to:
- Borrowing from friends and family (43%)
- Selling possessions (23%)
- Taking out payday loans (11%)
- Even resorting to crime (2%)
These findings align with Patrice Onwuka’s analysis for the Independent Women’s Forum (IWF), where she warned that policy efforts to cap interest rates would hurt the people they intended to help.
Small-Dollar Lending: A Pathway to Credit Inclusion
The CBCI’s 2024 Annual Report recognizes the importance of small-dollar lenders (SDLs) in promoting financial inclusion. SDLs serve low-credit and no-credit borrowers, helping them establish a “journey to prime” through responsible lending practices. Unlike traditional banks that exclude borrowers based on strict credit requirements, SDLs consider alternative data—such as rent and utility payment history—to assess a borrower’s ability to repay.
However, interest rate caps disproportionately impact SDLs. As the CBCI report highlights, rate caps in states like Illinois and New Mexico have driven responsible lenders out of business, leaving borrowers with fewer options.
Onwuka and IWF echo this concern, cautioning that credit access should not be artificially restricted. Consumers deserve choices, and policymakers should not impose a one-size-fits-all approach that eliminates financial tools for those who need them most.
The Future of Small-Dollar Lending
As part of its ongoing advocacy for financial inclusivity and free-market solutions, the Southwest Public Policy Institute (SPPI) hosted a special Juneteenth episode of SPPI-TV featuring Rodney Williams, Co-Founder of SoLo Funds. Co-hosted by Patrice, the episode critically examined the barriers alternative lenders face, particularly after increased regulatory scrutiny from the Consumer Financial Protection Bureau (CFPB).
Rodney Williams shared SoLo Funds’ mission to provide peer-to-peer lending services to underserved communities, offering an alternative to traditional banks and predatory lenders. By leveraging technology and non-traditional data to assess borrowers, SoLo Funds aligns with the Congressional Black Caucus Institute’s recommendation that small-dollar lenders (SDLs) should expand access to financial services using innovative underwriting models.
However, the discussion also highlighted how government overreach—through interest rate caps and CFPB’s regulatory actions—threatens financial innovation and economic empowerment. Williams emphasized that while SoLo Funds is helping bridge the credit gap, policymakers are pushing harmful restrictions that could limit or eliminate these financial options.
This aligns directly with the findings of SPPI’s No Loan for You! reports, which demonstrate that price controls, such as interest rate caps, do not reduce borrowing costs but instead lead to credit shortages. As Onwuka noted, policymakers’ misguided attempts to “protect” consumers often strip them of their financial choices, forcing them to turn to less favorable options like pawnshops, selling possessions, or borrowing from family and friends.
The Real Solution: Expanding Credit Access, Not Restricting It
Instead of restricting access to credit through price controls, policymakers should focus on:
- Encouraging competition among lenders to drive down costs naturally.
- Promoting alternative credit models, like peer-to-peer lending and fintech innovations, that expand financial access.
- Allowing lenders to use non-traditional credit data, as recommended by CBCI, to broaden credit eligibility.
- Removing artificial barriers like rate caps: price controls do not lower borrowing costs but instead eliminate financial options.
The 2025 Cash Poor Report provides a clear warning: America’s cash-poor population is growing, and restrictive policies like interest rate caps are worsening their financial struggles. SPPI’s research, alongside the findings of the CBCI, IWF, and independent financial analyses, all point to the same conclusion:
Financial inclusion depends on access, but deeply flawed policies systematically dismantle access.
It’s time to rethink how we regulate credit markets. Instead of imposing price controls, we must promote policies that allow lenders to innovate, compete, and responsibly serve those who need credit the most.