CFPB’s Small-Dollar Rule Falls Short For Many Consumers

October 5, 2017
Bobby Grant

Washington, D.C. - Richard Hunt, President and CEO of the Consumer Bankers Association (CBA), released the following statement in response to the issuance of the CFPB’s final rule on small-dollar lending:

“The CFPB whiffed at an opportunity to provide assistance to the millions of Americans experiencing financial hardship,” CBA President and CEO Richard Hunt said. “It is hard to believe just days after the CFPB reported more than four in ten Americans were struggling to pay monthly bills – often because of unexpected or emergency expenses – the Bureau would drive Americans to pawnshops, offshore lenders, high-cost installment lenders and fly-by-night entities.

“The CFPB should have worked with other regulatory agencies to examine the use of small-dollar lending programs, such as deposit advance products, so Americans can receive short-term, emergency loans from their banks. These products come at lower costs and with more protections than payday loans from other lenders.”

The Elimination of Deposit Advance Products

Prior to 2013, some banks offered short-term, small-dollar lending products, known as the Deposit Advance Product (DAP),to meet overwhelming consumer demand for access to emergency credit. Unfortunately, 2013 FDIC and OCC guidance effectively eliminated the ability of heavily regulated financial institutions to offer a viable alternative to compete with payday lending. The FDIC and OCC guidance recommended the use of underwriting that is more appropriately applied to a much larger mortgage loan and placed soft caps on percentage rates banks could offer consumers. This, combined with a low interest rate environment, has made small-dollar credit unviable and has forced banks to exit the market.

Small-Dollar Fact Sheets:

CBA Small-Dollar Lending One-Pager

CBA Small-Dollar Lending Myth vs. Fact

CBA Comment Letter of CFPB Report

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About the Consumer Bankers Association

The Consumer Bankers Association represents America’s retail banks above $10 billion in assets. We advance legislation and promote policies geared toward creating a stronger industry and economy. Established in 1919, CBA’s corporate member institutions account for 1.6 million jobs in America, extend roughly $3 trillion in consumer loans, and provide $270 billion in small business loans. Follow us on Twitter @consumerbankers.