Recommended 36% interest rate cap would expand availability of responsible credit to 250k new Iowa consumers

Des Moines, IA - (August 6, 2024)– The American Fintech Council (AFC), the premier industry association representing responsible fintech companies and innovative banks, recently submitted a comment letter urging the Iowa Division of Banking (IDOB) to modernize the state’s consumer finance licensing statutes. AFC shared recommendations for how the IDOB can improve the consumer lending environment in Iowa by improving access to financial services for historically underrepresented communities, as well as increasing regulatory clarity around credit products.

“All Iowans deserve access to innovative and responsible financial products and services; however, the current regulatory framework excludes too many consumers,” said Ian P. Moloney, SVP and Head of Policy and Regulatory Affairs at AFC. “We encourage IDOB to explore proposals that would improve credit access to underserved communities so they may benefit from the products and services that are driving the future of consumer-centric finance. Further, providing clarity in Iowa’s licensing standards will strengthen the state’s financial services market and ensure Iowans are able to choose the products and services that best fit their needs and help them take control of their financial futures.”

In the letter, AFC recommends the establishment of a flat 36% interest rate cap on loans. AFC and national consumer advocates have consistently supported this standard, recognizing its positive impact on underserved communities, particularly those with damaged or minimal credit histories. According to AFC's analysis, modernizing Iowa’s interest rate cap could expand access to responsible credit for an estimated 250,000 additional Iowans, significantly improving financial inclusion across the state.

AFC also asked the IDOB to establish clear, characteristic-based definitions for "credit products" and "non-credit products" within Iowa’s Consumer Finance Licensing Statutes. This clarity, AFC argues, would ensure the proper legal categorization of financial products and help promote innovation and consumer protection.

AFC will continue to advocate for prudent consumer protections, increased access to responsible credit products, and regulatory clarity for financial services companies in Iowa and beyond.

A standards-based organization, AFC is the premier trade association representing the largest financial technology (Fintech) companies and innovative BaaS banks. Our mission is to promote a transparent, inclusive, and customer-centric financial system by supporting responsible innovation in financial services and encouraging sound public policy. AFC members foster competition in consumer finance and pioneer products to better serve underserved consumer segments and geographies.

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Read the AFC Comment Letter here.