FDIC Issues Final Guidelines on Small-Dollar Loans, Offers CRA Credit
WASHINGTON -- The FDIC Board followed up at its last board meeting on talk of helping banks provide a payday loan alternative with formal guidelines.
The FDIC is encouraging banks to promote affordable small dollar loan products to customers that are in compliance with consumer protection laws and are structured in a responsible, safe and sound manner. "Safe and sound small-dollar lending programs that comply with consumer protection laws will not be criticized by FDIC examiners," the guidelines state. In return, banks could receive favorable consideration under the Community Reinvestment Act.
"Despite the tremendous demand for small-dollar, unsecured loans, most products available in the market come at a high cost to consumers," FDIC Chairman Sheila C. Bair said. "Banks have the tools and infrastructure to create products meeting this need that are beneficial to both the banks and their customers."
The guidelines explore several aspects of product development, including affordability and streamlined underwriting, as well as tools, such as financial education and linked savings accounts that may address long-term financial issues that concern borrowers.
Chairman Bair has previously commended credit unions on their efforts in offering payday lending alternatives.