In a recent and alarming move, the Consumer Financial Protection Bureau (CFPB) has attacked SoLo Funds, the nation’s largest consumer-facing Black-led and owned fintech. This action not only misrepresents SoLo Funds’ groundbreaking work but also serves as a stark reminder of how regulatory overreach can stifle innovation and perpetuate financial inequities.
Through its unique peer-to-peer community finance model and voluntary tipping fee structure, SoLo Funds has saved consumers an estimated $40 million in fees compared to traditional subprime credit cards and payday loans. This platform has facilitated over 1 million loans, providing critical financial support to households that mainstream financial institutions have long ignored or exploited.
Despite its success and positive impact, the CFPB has chosen to target SoLo Funds, accusing it of misconduct. SoLo Funds claims this accusation is baseless. Regardless, it indicates a broader issue: the CFPB’s increasing tendency to regulate by enforcement of non-standard rulemaking rather than fostering a collaborative and innovative financial landscape.
SoLo Funds has diligently complied with top legal counsel and consistently contacted regulators, including the CFPB, to establish a fair and effective regulatory framework. The company has worked tirelessly to ensure its operations align with legal standards while maintaining affordability and accessibility for its users. Yet, SoLo was blindsided by a lawsuit from the CFPB, despite having reached a tentative agreement with the agency just the night before.
While SoLo Funds, a minority-led startup with under 100 employees, faces scrutiny, larger and more well-funded Silicon Valley companies employing similar fee structures continue operations unchallenged. This selective enforcement raises serious questions about the CFPB’s true motivations and commitment to supporting innovative solutions to address financial disparities.
Our political leaders have called for innovation to tackle our communities’ financial inequalities. SoLo Funds has answered this call, developing a model that addresses these inequalities and empowers underserved populations. The CFPB’s actions, however, threaten to undermine these efforts and set back progress by imposing unnecessary and burdensome regulations on a company that is fundamentally improving the financial lives of its users.
SoLo Funds is not the problem but part of the solution. By providing a platform where people can support each other financially, SoLo fosters a sense of community and empowerment that is sorely lacking in traditional financial models. The CFPB’s misguided actions threaten to dismantle this progress and push underserved communities back into the clutches of predatory financial products.
Lawmakers and regulators need to support, not stifle, financial innovation. We must demand rigorous scrutiny of the CFPB’s actions and advocate for a regulatory environment that encourages innovation and protects the financial freedom of all Americans.
Meanwhile, consumers negatively impacted by CFPB actions are encouraged to file a report with the Southwest Public Policy Institute’s Bureau to Protection Financial Consumers from the Consumer Financial Protection Bureau (BPFCCFPB). More information about this initiative is available at the BPFCCFPB website: bpfccfpb.org.