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FDIC
Launches Study to Identify Alternatives to Payday Loans
WASHINGTON, DC - The Federal Deposit Insurance
Corporation (FDIC) is now
accepting bankers' applications to participate in its Affordable and
Responsible Consumer Credit pilot program, which will begin in January
2008. Between 20 and 40 participants will be selected from interested
institutions based on information describing their small-dollar loan
programs. Applications will be accepted through November 20, 2007.
The Affordable and Responsible Consumer Credit program is a two-year
study designed to assist bankers by identifying information on
replicable business models for affordable small-dollar loans.
"Offering low-cost alternatives to high-cost payday loans can be done
profitably. I would like to see reasonably priced, small dollar loans
become a staple offering among depository institutions, " said FDIC
Chairman Sheila C. Bair. "The results of this study will be widely
shared with other institutions to help them structure and market
affordable small dollar loans, which in turn will meet an obvious demand
among bank customers for this type of credit product."
Key features of the pilot will include loan amounts of up to $1,000;
payment periods that extend beyond a single pay cycle; annual percentage
rates below 36 percent; low or no origination fees; and no prepayment
penalties. Additional features to be considered include streamlined
underwriting; prompt loan application processing; an automatic savings
component; and access to financial education.
Participating financial institutions that offer these products in a safe
and sound manner can receive favorable consideration under the Community
Reinvestment Act (CRA). In order to participate, a bank must be highly
rated, well-managed and well-capitalized and it must confirm that its
proposed product meets consumer credit needs at a reasonable cost.
Applications and additional information about the Affordable and
Responsible Consumer Credit program can be found at
www.fdic.gov/
smalldollarloans .
Source: Federal Deposit Insurance Corporation
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