American Financial Services Association

Traditional Installment Loans: Delivering High-Quality Credit for 100 Years+

Blog Posts

Traditional Installment Loans: Delivering High-Quality Credit for 100 Years+

The American Banker reported on Sunday (July 19) what AFSA has been saying for years – banks aren’t making, and don’t want to make, small-dollar loans.

In the article, Uncertainty About CFPB Has Banks Leery of Small-dollar Lending, author Kate Berry writes that despite the fact that the Trump administration has urged banks and credit unions to compete in the small-dollar lending space and to offer more credit options to consumers, banks remain wary of offering small-dollar credit products.

The prudential regulators have issued guidance encouraging banks to embrace small-dollar lending; the Consumer Financial Protection Bureau (CFPB) approved a process for banks to offer loans or lines of credit for amounts up to $2,500; yet, banks still see this space as filled with risk.

AFSA’s message to the prudential regulators and the CFPB has been that this market is already well-served. Delivering high-quality, affordable small-dollar loans to millions of consumers is what traditional installment lenders have been doing for more than a century.

While banks have noted time and time again that they are not necessarily structured to offer these products, traditional installment lenders have a long and successful track record offering these products to consumers nationwide.

Instead of trying to fit a square peg into a round hole, we encourage regulators to recognize that high-quality, small-dollar lending products already exist.

July 21st, 2020 by