The FDIC has requested public comments on issues related to small-dollar lending by FDIC-Supervised financial institutions. Specifically, feedback is being requested regarding consumer demand for small-dollar credit products, the supply of small-dollar credit products currently offered by banks, and what the FDIC can do to facilitate increase small-dollar lending.
Overview on Small Dollar Lending
In their request for comment, the FDIC states that research indicates that 20 percent of U.S. households reported that their income varied “somewhat” or “a lot” from month-to-month. Moreover, according to research from the Federal Reserve, if faced with a hypothetical $400 expense, 4 in 10 U.S. adults in 2017 would borrow, sell something, or not be able to pay.
Given the unique role banks play in the communities they serve and the benefits to consumers of having a relationship with an insured financial institution, the FDIC states that banks are well-positioned to address the credit needs of their customers in a responsible manner. While some banks currently offer small-dollar credit products, there may be additional opportunities for banks to address unmet demand for consumer credit in their communities. Accordingly, the FDIC is inviting public comments on the full spectrum of issues related to the role banks can play in offering small-dollar credit, obstacles – regulatory and non-regulatory – that banks currently encounter in offering such credit, and whether there are steps the FDIC could take to enable banks to better serve this market.
Comments for Consideration
The FDIC is requesting input on the following specific questions:
To what extent is there an unmet consumer demand for small-dollar credit products offered by banks?
To what extent do banks currently offer small-dollar credit products to meet consumer demand?
To what extent and in what ways do entities outside the banking sector currently satisfy the consumer demand for small-dollar credit products?
What data, information, or other factors should the FDIC consider in assessing the consumer demand for small-dollar credit products?
What are the potential benefits and risks to banks associated with offering responsible, prudently underwritten small-dollar credit products?
What are the potential benefits and risks to consumers associated with bank-offered small-dollar credit products?
What are the key ways that banks offering small-dollar loan products should manage or mitigate risks for banks and risks for consumers?
What are the potential benefits and risks related to banks partnering with third parties to offer small-dollar credit?
What steps could the FDIC take, consistent with its statutory authority, to encourage banks to develop and offer responsible, prudently underwritten small-dollar credit products?
Are there any legal, regulatory, or supervisory factors that prevent, restrict, discourage, or disincentivize banks from offering small-dollar credit products? If so, please explain.
Are there any operational, economic, marketplace, or other factors that prevent, restrict, discourage, or disincentivize banks from offering small-dollar credit products? If so, please explain.
What factors may discourage consumers from seeking responsible, prudently underwritten small-dollar credit products offered by banks?
Are there specific product features or characteristics of small-dollar loan products that are key to meeting the credit needs of consumers while maintaining prudent underwriting?
Are there specific product features or characteristics that are key to ensuring the economic viability to a bank of responsible, prudently underwritten small-dollar credit products?
How can technology improve the ability of banks to offer responsible, prudently underwritten small-dollar loan products in a sustainable and cost-effective manner? Please specify the technology or technologies and the use case(s).
Are there innovations that might enable banks to better assess the creditworthiness of potential small-dollar loan borrowers with limited or no credit records with a nationwide credit reporting agency?
What role should the FDIC play, if any, in supporting innovations that enhance banks’ abilities to offer responsible, prudently underwritten small-dollar loans? Are there specific barriers that prevent banks from implementing such technologies or innovations?
How can technology be leveraged to improve consumers’ experiences and reduce potential risks to consumers associated with small-dollar credit products?
What other products and services that supplement or complement small-dollar credit offerings should banks consider? Are there other ways that banks can help consumers address cash-flow imbalances, unexpected expenses, or income volatility besides small-dollar credit products?
Are there any distinguishing characteristics of particular institutions, such as a bank’s size, complexity, or business model, that the FDIC should consider, and if so how?
Please provide any other comments or information that would be useful for the FDIC to consider.
Submitting Comments
Comments must be identified by “RIN 3064-ZA04” and may be submitted by any of the following methods:
Agency Website: https://www.fdic.gov/regulations/laws/federal/. Follow the instructions for submitting comments on the Agency Website.
Email: Comments@fdic.gov. Include the RIN 3064-ZA04 in the subject line of the message.
Mail: Robert E. Feldman, Executive Secretary, Attention: Comments, Federal Deposit Insurance Corporation, 550 17th Street, NW, Washington, DC 20429.
Hand Delivery: Comments may be hand-delivered to the guard station at the rear of the 550 17th Street, NW, building (located on F Street) on business days between 7:00 a.m. and 5:00 p.m.
Comments will be accepted for 60 days after publication in the Federal Register.
The entire request for comment can be found here.