Newsroom
February 15, 2018
Pew brief notes benefits of CUs offering small-dollar loan programs
A brief from Pew Charitable Trusts supports credit unions and banks offering small-dollar loan programs as they would provide "a far better option for Americans" by saving consumers billions of dollars annually.
The brief notes that Americans currently spend more than $30 billion annually on small-dollar loans – from payday, auto title, pawn, rent-to-own and other lenders outside of credit unions and banks. It goes on to detail the necessary regulatory steps that would need to take place for credit unions and banks to begin competing with other small-dollar lenders and some guidelines for these entities to follow as they develop new small-dollar loan programs.
"Millions of households could benefit if banks and credit unions were to offer small installment loans and lines of credit with standards strong enough to protect consumers, clear enough to avoid confusion or abuse, and streamlined enough to enable automated low-cost origination," the brief states.
While some credit unions and community banks already do offer some small-dollar loans and lines of credit, including through the NCUA's payday-alternative loan (PAL) program, the brief says these programs "have not achieved a scale to rival the 100 million or so payday loans issued annually—let alone the rest of the nonbank small-dollar loan market."
NAFCU has already been working with stakeholders on this issue. Last year, the association hosted a small-dollar lending working group discussion with representatives from several NAFCU-member credit unions, Pew Research Center, Center for Financial Services Innovation and Filene Research Institute to discuss credit unions' ability to provide members' needs for affordable, safe loans.
"Credit unions – as member-owned, cooperatives – offer a wide range of financial products and services, including loans specifically designed to aid members who have fallen victim to predatory payday lenders," said NAFCU Director of Regulatory Affairs Alexander Monterrubio. "NAFCU has worked closely with Pew, the CFPB and NCUA on this issue. We are supportive of opportunities that allow credit unions to offer more options to their membership base, including responsible small-dollar lending options.
"Loan offerings are determined based on the needs of a credit union's membership – so adoption will vary by credit union," he added.
The brief notes that Americans currently spend more than $30 billion annually on small-dollar loans – from payday, auto title, pawn, rent-to-own and other lenders outside of credit unions and banks. It goes on to detail the necessary regulatory steps that would need to take place for credit unions and banks to begin competing with other small-dollar lenders and some guidelines for these entities to follow as they develop new small-dollar loan programs.
"Millions of households could benefit if banks and credit unions were to offer small installment loans and lines of credit with standards strong enough to protect consumers, clear enough to avoid confusion or abuse, and streamlined enough to enable automated low-cost origination," the brief states.
While some credit unions and community banks already do offer some small-dollar loans and lines of credit, including through the NCUA's payday-alternative loan (PAL) program, the brief says these programs "have not achieved a scale to rival the 100 million or so payday loans issued annually—let alone the rest of the nonbank small-dollar loan market."
NAFCU has already been working with stakeholders on this issue. Last year, the association hosted a small-dollar lending working group discussion with representatives from several NAFCU-member credit unions, Pew Research Center, Center for Financial Services Innovation and Filene Research Institute to discuss credit unions' ability to provide members' needs for affordable, safe loans.
"Credit unions – as member-owned, cooperatives – offer a wide range of financial products and services, including loans specifically designed to aid members who have fallen victim to predatory payday lenders," said NAFCU Director of Regulatory Affairs Alexander Monterrubio. "NAFCU has worked closely with Pew, the CFPB and NCUA on this issue. We are supportive of opportunities that allow credit unions to offer more options to their membership base, including responsible small-dollar lending options.
"Loan offerings are determined based on the needs of a credit union's membership – so adoption will vary by credit union," he added.
Share This
Related Resources
Add to Calendar 2024-05-03 14:00:00 2024-05-03 14:00:00 Plan Sponsor Attitudes Toward Retirement Plan Management and Fiduciary Outsourcing About the Webinar In January 2024, Pentegra conducted a survey of retirement plan sponsors and their perspectives on retirement plan management and fiduciary outsourcing. The survey measured how sponsors are using fiduciary outsourcing to help better manage their retirement plans. It also captured their perspectives on what outsourcing does to help them better position their plans and drive improved retirement plan outcomes. Key Takeaways: What is the full scope of your responsibilities as a plan sponsor? What is fiduciary outsourcing and how does it work? How does fiduciary outsourcing help reduce workloads and minimize risk? How can a credit union best position its plan to drive improved outcomes? Register Here Web NAFCU digital@nafcu.org America/New_York public
Plan Sponsor Attitudes Toward Retirement Plan Management and Fiduciary Outsourcing
preferred partner
Pentegra
Webinar
Turning Lemons into Lemonade: Capitalizing in a Post-Banking Crisis Era
Strategy
preferred partner
Allied Solutions
Blog Post
Ensuring Safety and Soundness with AI
Management, Consumer Lending, FinTech
preferred partner
Upstart
Blog Post
Add to Calendar 2024-05-02 14:00:00 2024-05-02 14:00:00 Mastering Resilience in Incident Response Plans About the Webinar An Incident Response (IR) plan is crucial for guiding credit unions through major incidents efficiently and effectively. However, many IR plans lack resilience, making them less adaptable to the evolving threat landscape. Join us for our webinar Mastering Resilience in Incident Response Plans where DefenseStorm cyber experts Elizabeth Houser and James Bruhl will delve into the importance of resiliency within cybersecurity IR plans. Don’t miss out on the opportunity to learn how to: Ensure IR plan accessibility so that all team members with assigned roles are prepared for effective incident response. Conduct efficient and regular reviews to ensure roles and responsibilities are current, tools are relevant, and compliance requirements are met. Implement and utilize tabletops to regularly test the effectiveness of your IR plan. Enhance preparedness, efficiency, and confidence among responders. View On-Demand Web NAFCU digital@nafcu.org America/New_York public
Mastering Resilience in Incident Response Plans
preferred partner
DefenseStorm
Webinar
Get daily updates.
Subscribe to NAFCU today.