Banks urged to contract payday lenders with small, low-cost loans
Pew said elements of his proposal, including the 5% payment cap, had in the past been supported in public comments by several banking groups.
“Lots of people want and rely on low dollar lending, and banks are eager to extend their reliable and responsible service offerings to these borrowers,” said Virginia O’Neill, senior vice president of the regulatory compliance center. of the American Bankers Association.
Alexander Monterrubio, director of regulatory affairs for the National Association of Federally-Insured Credit Unions, said his organization supported more options for its membership base, “including small dollar responsible lending options.”
A spokesperson for a major bank, Fifth Third, said in an email that “we believe banks need to be able to meet the short-term, low dollar” needs of their customers.
Small installment loan proposals could face opposition from the payday lending industry. Regulators under the Trump administration have also become more pro-industry, which would face new competition.
The main lobby group representing payday lenders, the Community Financial Services Association of America, did not immediately respond to a request for comment. In the past, group chief executive Dennis Shaul has said the convenience industry welcomes competition, but is skeptical that many banks are serious about entering the low dollar lending market.
Here are some questions and answers about small installment loans:
Haven’t banks tried something like this before?
Some banks offered “deposit advances” before regulators stopped them in 2013. Advances were due in a lump sum on the borrower’s next payday, often at a rate of 10% per pay period. or at an annual percentage rate of 260%. Pew said he was opposed to banks re-offering such “unaffordable” advances.