Consumer-friendly services, including Credit Karma and NerdWallet, reportedly boost users rather than cause them harm.
New and Improved:
Micah Smith, CEO, founder, and financial guru, chats with Fox News Digital about the sneaky credit crisis that's affecting finances nationwide and how to tackle it.
In our digital era, more tools than ever are available to help folks with mediocre credit scores or limited credit history secure credit. These tools, often dubbed "fintech," have piqued the interest of congressional Democrats and regulatory bodies such as the Consumer Financial Protection Bureau (CFPB) and the Federal Communications Commission (FCC). Platforms like Credit Karma, NerdWallet, WalletHub, LendingTree, and Experian offer comparison-shopping tools, granting a better opportunity for loan and credit card approvals[4].
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The Consumer Financial Protection Bureau (CFPB) headquarters in Washington, D.C. (Photographer: Samuel Corum/Bloomberg via Getty Images / Getty Images)
Credit bureaus, like Experian, also provide similar resources, including a "no-ding decline" option. Customers can submit applications without damaging their credit scores, except if approved. Political figures like Sen. Dick Durbin (D-Ill.) and Sen. Elizabeth Warren (D-Mass.) argue that these platforms employ deceptive tactics and questionable practices to nudge consumers towards predatory lending[1]. The CFPB attempted to impose regulations to eliminate abusive or predatory practices, despite fintech pioneers such as Credit Karma and others disclosing how advertising compensation may affect the order of product offerings[3].
However, research from the Southwest Public Policy Institute (SPPI) reveals that comparison-shopping tools and lead generators offer consumers more informed options[2]. The report indicates that unnecessary government intervention could be detrimental to individuals grappling with obtaining credit.
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loudestvox.com/business/swipe-right-how-comparison-shopping-tools-and-lead-generators-revolutionize-consumer-access-to-products-and-services/
Titled "Swipe Right: How Comparison Shopping Tools and Lead Generators Revolutionize Consumer Access to Products and Services," the report narrates the experiences of SPPI's founder and president, Patrick Brenner, after his divorce[2]. Seeking credit was a lengthy and frustrating process, where he applied directly for credit cards through websites like Wells Fargo, Capital One, Discover, and others. For seven attempts, he met with rejection, embodying the struggles faced by individuals with limited credit histories. Turning to Credit Karma's tools, however, enabled him to secure an offer from Merrick Bank for a credit card with a starting limit of $500, which increased to $1,000 after making on-time payments for seven months[2].
The CFPB rolled out a tool for credit card searches. Unlike comparison-shopping tools, which can be easily accessed via mobile devices, the CFPB website only offers fee and rate disclosures. To apply for a card, consumers must navigate the bank or credit union and submit applications directly, without any indication of approval odds[2].
The SPPI report concludes with a caution against excessive regulation.
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"Policymakers must acknowledge the pivotal role these platforms play as alternatives to traditional banking, particularly for those denied access through traditional avenues. The focus should be on preserving a competitive market where consumers are free to select from various options and armed with the knowledge to make intelligent decisions."
[1] Davison, A. (2021, December 15). Lawmakers Urge CFPB to Rein in Some Fintech Firms, Limits on Consumer Access to Credit. The Wall Street Journal. https://www.wsj.com/articles/lawmakers-urge-cfpb-to-rein-in-some-fintech-firms-limits-on-consumer-access-to-credit-11639708400
[2] Brenner, P. (2022). Swipe Right: How Comparison Shopping Tools and Lead Generators Revolutionize Consumer Access to Products and Services. Southwest Public Policy Institute. https://www.sppi.org/docs/Swipe%20Right.pdf
[3] Ramirez, M. R. (2021, November 23). Consumer Financial Protection Bureau Releases Proposed Rules to Protect Consumers from Credit Card and Auto Loan Surprises. Consumer Financial Protection Bureau. https://www.consumerfinance.gov/about-us/newsroom/consumer-financial-protection-bureau-releases-proposed-rules-to-protect-consumers-from-credit-card-and-auto-loan-surprises/
[4] Best credit card comparison sites. (2021, November 9). Money. https://money.com/credit-cards/best-credit-card-comparison-sites/
- Micah Smith discusses a nationwide credit crisis with Fox News Digital, highlighting tools like Credit Karma, NerdWallet, WalletHub, LendingTree, and Experian that help individuals with limited credit history secure credit.
- These fintech platforms, often criticized for deceptive tactics and questionable practices, provide comparison-shopping tools, enabling better loan and credit card approvals.
- Senator Dick Durbin and Senator Elizabeth Warren argue that such platforms nudge consumers towards predatory lending, while the Consumer Financial Protection Bureau (CFPB) attempts to regulate abusive or predatory practices.
- Research from the Southwest Public Policy Institute suggests that unnecessary government intervention could be detrimental to individuals trying to obtain credit.
- The report also shares the experiences of the institute's founder, who secured a credit card offer from Merrick Bank using Credit Karma's tools, when traditional methods failed.
- The CFPB, unlike comparison-shopping tools, offers fee and rate disclosures on its website, requiring consumers to directly apply for a card through banks or credit unions.
- The SPPI report concludes by urging policymakers to acknowledge the importance of these platforms as alternatives to traditional banking, particularly for those denied access through traditional avenues, and to preserve a competitive market.
