Publication DateSeptember 2011
Author(s)Kim R. Manturuk
Strong demand exists for small-dollar consumer credit ill-served by existing products, such as payday loans, credit cards or bank loans. Consumers want credit that is affordable, repayable and close-ended.
Our research indicates that there is a strong demand for small-dollar consumer credit that is ill-served by existing products, such as payday loans, credit cards or bank loans. Consumers want credit that is affordable, repayable and close-ended.
This promise is found in the Federal Deposit Insurance Corporation’s (FDIC) Affordable Small-Dollar Loan Products Guidelines issued in June 2007, which calls for FDIC-supervised financial institutions to promote consumer credit products with an APR not to exceed 36% and amortizing payments. The guidance also recommends underwriting for ability to repay, incorporating a savings component into the product, working with other organizations, and providing an avenue for financial education.
We encourage lawmakers to promote policies which encourage these types of loans, as well as continue to encourage technological innovation in the development of consumer credit products.