The FDIC has announced a program designed to study and encourage small dollar lending programs designed to compete with payday lenders. Under the program banks would offer “loan amounts of up to $1,000, mandatory savings components, payment periods that extend beyond a single pay cycle, interest rates below 36 percent, low or no origination fees, no prepayment penalties, prompt loan application processing, and access to financial education to help with asset building.”
The results of the study will be made available to other banks as a resource. “There is a tremendous appetite for small-dollar loans, but there are far too few low-cost alternatives for consumers to choose from,” said FDIC Chairman Sheila C. Bair. “The pilot project our Board approved will be an important first step in filling the void that exists today.”
We already know that banks bankroll payday lenders, will they step up and lend to the same people in a responsible fashion?