Latest Battle Over California Lending Market: Should Grocery Stores Offer Large Loans?

By James Rufus Koren
Los Angeles Times

WWR Article Summary (tl;dr) As columnist James Rufus Koren explains, the loans are made by Insikt, a San Francisco firm that argues the larger loans will help working families and small-time entrepreneurs.


Walk into a Northgate supermarket and, along with produce and pan dulce, you can walk out with a small loan from the store’s Prospera financial services stand.

Those loans top out at $2,500. Now, a bill working its way through the state Legislature could boost that maximum to $7,500, enough, the bill’s author said, to pay for an immigration lawyer or a funeral.

The loans are marketed by Northgate but actually made by Insikt, a San Francisco firm that argues the change would help working families and small-time entrepreneurs while disrupting California’s increasingly expensive market for personal loans.

Lenders commonly charge interest rates higher than 100 percent, while Insikt, if the bill passes, would be able to charge no more than 35 percent, plus fees.

“The large loan market is dominated by a lot of predatory loan structures and pricing that we want to create a better alternative for,” said Insikt founder and Chief Executive James Gutierrez. “There are people who need larger loans. Borrowers can get a loan up to $2,500 from us, but then they have to piecemeal the rest and they’re likely coming in at over 100 percent APR.”

But consumer advocates and some lenders, including another firm Gutierrez founded and left, say it’s not that simple and call the bill a giveaway to Insikt that would do nothing to encourage more lenders to offer lower interest rates.

“California does not need a bill that would benefit the risky model of a single business,” a coalition of advocacy groups, including the Center for Responsible Lending and the advocacy arm of Consumer Reports, wrote in a letter to lawmakers last month. “Until we make real progress on across-the-board small-dollar credit issues, bad actors will continue to exploit gaps in the law and peddle costly loans in our communities.”

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