Federal financial regulatory agencies encourage responsible small-dollar loans


Financial institutions, including credit unions, banks and savings associations are being encouraged by federal financial regulatory agencies, including NCUA, to offer “responsible small-dollar loans” to consumers and small businesses in response to the economic impact occurring from COVID-19.

“The agencies recognize the important role that responsibly offered small-dollar loans can play in helping customers meet their needs for credit due to temporary cash-flow imbalances, unexpected expenses, or income short-falls during periods of economic stress or disaster recoveries,” a joint statement released on Thursday by the NCUA, Federal Reserve System, Federal Deposit Insurance Corporation, the Office of the Comptroller of the Currency and the Consumer Financial Protection Bureau said.

Further, the agencies said in the statement that federally supervised financial institutions are well-suited to meet the credit needs of customers affected by the current COVID-19 emergency and that many financial institutions can offer products that could be used or modified to help meet customers’ needs, while at the same time conforming with applicable laws and regulations.

The statement said that loans can be offered through a variety of loan structures, such as open-end lines of credit, closed-end installment loans or appropriately structured single payment loans.

In the event that borrowers experience unexpected circumstances and cannot repay a loan as structured, the agencies are encouraging financial institutions to consider working out strategies designed to help enable the borrower to repay the principal of the loan while mitigating the need to re-borrow.

Finally, the agencies reminded financial institutions that all loans should be offered “in a manner that is consistent with safe and sound practices, provides fair treatment of consumers, and complies with applicable statutes and regulations, including consumer protection laws.”



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