FDIC Advisory Committee to Highlight Results of FDIC Small-Dollar Loan Pilot
The Federal Deposit Insurance Corporation's (FDIC's) Advisory Committee on Economic Inclusion (ComE-IN) will meet on Thursday, June 24, to discuss the results of the FDIC's small-dollar loan pilot program (the pilot). The pilot, launched in 2008, was a two-year case study designed to illustrate the feasibility of banks offering affordable small-dollar loans as an alternative to high-cost credit products, such as payday loans and fee-based overdraft programs. Outside sources estimate payday loan volume at more than $40 billion a year and overdraft fees at more than $38 billion a year.
The pilot concluded with 28 volunteer banks with total assets ranging from $28 million to nearly $10 billion and offices in 27 states. Banks in the pilot provided loans up to $2,500, at annual percentage rates of less than 36 percent, with low or no fees and loan terms of at least 90 days to give consumers time to repay.
"Bankers in the pilot have found that using safe and affordable small-dollar loans to build long-term banking relationships is good for customers and the bottom line," said FDIC chairman Sheila C. Bair. "What's more, small-dollar loans may help banks better adhere to existing regulatory guidance on monitoring excessive overdraft usage and offering consumers other options, such as affordable small-dollar loans."
The Advisory Committee will review how lessons learned from the pilot and other strategies can be used to encourage more banks to offer safe, affordable and feasible small-dollar loans.
Additionally, the Advisory Committee members will continue their discussion on the FDIC's proposed templates for safe, low-cost transactional and basic savings accounts, and will review the public comments received regarding the templates. The FDIC solicited comment on all aspects of the templates, including the potential benefits to under-served low- and moderate-income consumers, product design features that would be attractive to these consumers and feasible for banks, and ways to minimize costs of offering these products.