OCC Commissioner Says Guidance on Small-Dollar Loans for Banks Coming Soon

Joseph Otting, Comptroller of the Currency, told reporters at a press roundtable last week that bank regulators like the OCC hope to make small dollar loans a simpler alternative to payday lenders and check cashers. Currently, very few banks offer these types of loans, which fall between a few hundred and a few thousand dollars, to consumers.

According to Politico, Otting said that “national banks are waiting to see what the regulatory community is going to come up with in the form of either guidance or a rule, and we’re hopeful that we’re going to be able to produce a joint agency document sometime early this year.”

In May 2018, the OCC encouraged banks to offer installment loans because they can be paid back in as little as 45 days or as long as a year. However, U.S. Bank was the only large institution to follow through and offer these types of products. Their checking account customers have been able to borrow small installment loans since September 2018 as part of their “Simple Loan” product.

The product has fit the bill of what Otting hopes to see more banks do.

“That product has kind of like hit the button, so to speak, of fulfilling the needs of a client of theirs that doesn’t force them outside the banking system to find a product like that,” he said.

Alternatively, the U.S. Bank installment loans accentuate the conflict between regulation and legislation, notably from House Financial Services Committee Chairwoman Maxine Waters, who would like to impose a 36 percent rate cap on consumer loans.