Now Serving 4000% Interest Rate Loans
Serena Williams' latest venture: super expensive loans from the comfort of your phone
Tennis great Serena Williams is now an active venture capitalist.
Her firm, Serena Ventures, is now partnering with a fintech lender — SoLo Funds.
Here’s what Serena has to say about the partnership:
Speaking about the investment, Serena Williams, managing partner at Serena Ventures, said in a written statement: “SoLo is transforming the lives of everyday Americans with democratized access to capital and returns that’s truly rooted in community. Community finance is working and SoLo is proof of that.”
Meanwhile, at least one state is prohibiting SoLo from operating there because the fintech lender charges excessive interest rates — up to 4000% — on its loans.
Based on Connecticut’s analysis of loans facilitated in the state, the typical principal amount was $100, with an average ‘lender tip’ of $21 and an average ‘donation’ to Solo of $10 — equating to APRs that ranged from 43% to as much as 4,280%.
That’s not exactly “democratized” access to capital, despite Williams’ claim.
It also doesn’t really seem to be “working,” unless by working, Williams means working to make SoLo Funds and Serena Ventures better off at the expense of low-income borrowers.
Could Your Next Car Loan Land You in Jail?
A recent piece in MarketWatch reveals some staggering statistics on auto loan debt:
In 2019, about 85% of new car buyers in the U.S. used a loan to pay for their car, according to Public Interest Research Groups, a consumer advocacy organization.
Americans currently owe about $1.5 trillion in auto loan debt.
The average monthly payment now exceeds $700 — and cars are financed on terms up to 84 months.
As it turns out, some auto lenders can be pretty unscrupulous.
One prominent auto lender, Credit Acceptance, is being sued by New York’s Attorney General and by the Consumer Financial Protection Bureau (CFPB) for unfair and deceptive practices.
“Credit Acceptance obscured the true cost of its loans to car buyers, leading to severe financial distress for borrowers and subjecting them to aggressive debt collection tactics on loans its own systems predicted that borrowers can’t afford to repay,” said CFPB Director Rohit Chopra. “The CFPB and the New York Attorney General seek to halt Credit Acceptance’s illegal practices and make consumers whole.”
In some cases, these car loan debts can land a borrower in jail.
For their story, MarketWatch talked to the authors of a recent book (Cars and Jails: Freedom Dreams, Debt and Carcerality) that highlights the connections between cars and jail.
The authors, NYU Professors Julie Livingston and Andrew Ross, explain that while defaulting on a debt won’t lead you to prison, the failure to appear in court can result in a bench warrant.
The net result of this really is a crushing burden on people and it’s not optional. If you don’t want student debt, you don’t have to go to college, but in almost all parts of this country, you have to have a car, so that is an automatic debt burden and it’s increasingly a crushing debt burden.
Just as with traffic fines, which can lead to detention, these civil debts can also put you behind bars. Mostly for contempt of court, technically speaking you can’t be jailed for failing to make a debt payment, but you can be jailed for contempt of court and that’s how creditors pursue auto loan debtors in the small claim courts of this country.
Imagine the double nightmare of a bad lender like Credit Acceptance threatening you with not only the loss of your car, but also potential jail time.
Takeaways
Auto loan debt is one more example of an economy in a precarious position.
Combine that with other key indicators — the prevalence of earned wage access loans, the growth of buy now, pay later — and you begin to see a picture of an economy that is just not working for a large segment of the population.
Some would argue it is working just the way it is supposed to — those financing the loans and those managing the finances (earned wage apps, buy now, pay later, car and other loans) are going to get paid. Meanwhile, those borrowing are perpetually left behind.