Congressman Jonathan Jackson has asked the Consumer Financial Protection Bureau (CFPB) to consider SoLo Funds, a peer-to-peer lending platform that focuses on expanding financial access in underserved communities. In a letter to CFPB Director Rohit Chopra, Jackson outlined SoLo’s approach and its role in addressing gaps in the financial system for middle-class and marginalized Americans. 

Jackson’s letter did not propose new rules but emphasized the importance of regulators understanding SoLo’s unique model, which connects borrowers and lenders directly, bypassing traditional financial institutions. This structure allows people with limited savings or credit access to secure small-dollar loans in times of need.

“SoLo Funds’ peer-to-peer lending platform provides borrowers and lenders the ability to apply advanced technology to support the seamless and quick transacting of short-term, small-dollar lending,” Jackson wrote. “[It] provides a community-based solution to the failures of the financial market.”

Jackson highlighted the broader issue of financial inclusion, noting that many Americans struggle to access emergency funds. According to the Federal Reserve and the 2023 Cash Poor Report, a significant portion of Americans would be unable to cover an unexpected $1,000 expense, leaving them reliant on high-interest payday loans. Jackson pointed to SoLo as an alternative, allowing people to avoid high costs associated with traditional loans.

He also emphasized SoLo’s distinction as a minority-founded, minority-led platform, certified as a B Corp, which recognizes social and environmental performance. Jackson noted that SoLo’s model offers financial options to those who may not qualify for loans through traditional means, including individuals with poor credit or low socioeconomic status.

“As the only Black-led Certified B Corp, SoLo Funds aims to provide equitable access to capital across these communities,” Jackson stated.

SoLo operates on a decentralized system in which individual lenders fund small loans for borrowers rather than financial institutions. “None of the loans funded on the SoLo marketplace have been funded in the name of a financial institution,” Jackson wrote.

Peer-to-peer lending has garnered attention in recent years as a viable alternative to traditional banking, with technology playing a growing role in offering financial solutions to underserved populations. Jackson’s letter positions SoLo within this trend, as one of several fintech models designed to provide greater financial access to those outside the traditional banking system.

Jackson’s remarks come at a time of heightened regulatory scrutiny for fintech companies as they expand their roles in financial markets. With more Americans turning to nontraditional lending options, platforms like SoLo Funds are becoming part of a larger conversation about financial inclusion.

Jackson encouraged the CFPB to consider how regulations can accommodate platforms like SoLo while maintaining consumer protections. He also highlighted SoLo’s cooperation with regulators, noting that the company has voluntarily engaged with state and federal authorities over the past two years.

“SoLo has engaged with regulators on the state and federal levels to explain the model and the extraordinary steps they take to ensure customers are protected while receiving much-needed finance,” Jackson wrote.

Jackson’s letter acknowledged the need for regulation but urged that it not stifle innovation in the sector. He expressed optimism about fintech’s potential to continue addressing financial inequality, provided that regulatory frameworks support growth while safeguarding consumers.

“I hope you will work with the SoLo Funds team to find fair, meaningful regulation that allows for them to operate in a robust way across the country so that innovation across this field can continue,” Jackson wrote.

Link to the Letter: https://solofunds.com/congressional-letter-to-cfpb-director/