Small Dollar Loan Pilot Program

Small-Dollar Loan Pilot Program

In February 2008, the FDIC began a two-year pilot project to review affordable and responsible small-dollar loan programs in financial institutions.

The pilot is a case study intended to identify effective and replicable business practices to help banks incorporate affordable small-dollar loans into their other mainstream banking services. Best practices resulting from the pilot will be identified and become a resource for other institutions. Thirty-two (32) volunteer banks are participating. These banks have total assets ranging from $26 million to $10 billion and they are in diverse geographic locations.

Program Requirements
A key goal of the pilot is to observe and encourage participating institutions to experiment with providing safe, sound, affordable, and profitable small-dollar loans. Therefore, the FDIC has provided general guidelines for banks that seek to participate. It is anticipated that current or planned products offered by the participating banks are generally consistent with the FDIC's guidelines on small-dollar lending (see FDIC Press Release: PR-52-2007: FDIC Issues Final Guidelines on Affordable Small-Dollar Loans)

Key features described in the Guidelines on Affordable Small-Dollar Loans include:

* Loan amounts of up to $1,000;
* Amortization periods longer than a single pay cycle and up to 36 months for closed-end credit, or minimum payments that reduce principal (i.e., do not result in negative amortization) for open-end credit;
* Annual percentage rates (APR) below 36 percent;
* No prepayment penalties;
* Origination and/or maintenance fees limited to the amount necessary to cover actual costs; and
* An automatic savings component.