The Southwest Public Policy Institute (SPPI) applauds Alaska Governor Mike Dunleavy for vetoing Senate Bill 39, legislation that would have imposed a rigid 36% annual percentage rate (APR) cap on consumer loans up to $25,000. The governor’s action preserves access to credit for thousands of Alaskans who rely on short-term, small-dollar lending, especially those underserved by traditional financial institutions.
SB 39 passed the Alaska Legislature with bipartisan support, backed by advocacy groups aiming to curtail what they termed “predatory lending.” However, as Governor Dunleavy noted in his veto message, the bill’s likely consequence would have been the elimination of critical financial options for Alaskan households and small businesses struggling with inflation and limited credit access.
“Governor Dunleavy made the right choice for Alaska consumers,” said Andrew Duke, CEO of the Online Lenders Alliance. “SB 39 would have taken away credit options and financial choices for Alaskan consumers and small businesses.”
Nearly one in five Alaskan households is unbanked or underbanked, and 31% of Alaskans are considered credit constrained. As Duke further noted, Alaskans also carry the highest average credit card balance in the country, compounding the risk of financial exclusion if legal lending channels are shut down.
SPPI’s own research affirms these concerns. In its groundbreaking studies—No Loan For You! and No Loan For You, Too!—SPPI tested real-world access to small-dollar credit after similar rate caps were enacted in New Mexico. The findings were unequivocal:
- Every major bank rejected SPPI’s test applications for small-dollar loans.
- 86% of credit unions either denied applications or imposed such burdensome requirements that loans were functionally unavailable.
- Consumers were forced to seek unregulated or riskier alternatives, such as overdraft protection or unlicensed lenders.
“The notion that traditional banks and credit unions will fill the void left by fintech lenders is a fantasy,” said Patrick M. Brenner, SPPI President. “We’ve already seen the fallout in New Mexico. Alaska would have faced the same credit desert.”
Indeed, Illinois’s 2021 rate cap, nearly identical to SB 39, triggered a 64% drop in licensed lenders and a 44% decrease in loans to subprime borrowers, while increasing the average loan size by 40%—a sign of less, not more, consumer protection.
This veto preserves a flexible, competitive lending environment in Alaska, one that empowers consumers to choose the credit products that best suit their needs without sacrificing legality or safety. As Independent Women’s Forum’s Patrice Onwuka testified, “Fintech loans have improved borrower credit scores, particularly among lower-income, Black, and Hispanic consumers.”
SPPI remains committed to defending credit access, financial inclusion, and responsible innovation in consumer finance. We urge policymakers in other states to learn from New Mexico and now Alaska: rate caps don’t protect the vulnerable; they push borrowers further into financial distress.
