The Inclusive Economy
The Importance of SB 896
By Paul Day on 08/26/2014 @ 04:15 PM
August is a momentous month for the asset-building field. Thanks to the tremendous work of our partners at Mission Asset Fund, SB 896 became law in California, making it the first state to recognize credit-building as an important tool for increasing social mobility.
The bill received unanimous bipartisan support through the legislative process, with zero votes in opposition. This is testament to the strength of the arguments in favor of asset-building with 17 California nonprofits providing letters in support of the legislation.
What does the bill do? Basically, for years the California legislature has been trying to regulate and impose fees on payday lenders to squash the practice, but it hasn’t worked. Low-income people are drawn to these high-interest loans because they have few other options.
SB 896 paves the way for nonprofits to provide more affordable small-dollar loan alternatives with lower interest rates. The legislation establishes a licensing exemption within the California Finance Lenders Law, which will make it easier for nonprofit organizations to expand their lending.
SB 896 will enable people with limited credit histories to finance the capital they need to start microbusinesses. With access to affordable lending products, borrowers can improve their credit histories and become part of the financial mainstream.
CFED celebrates the passage of SB 896—and we applaud the California legislature for this important step toward making asset building a recognized strategy to create opportunities that improve the lives of the underbanked. We look forward to seeing more forward motion on similar legislation in other states. Stay tuned!