State AGs Send Comments to FDIC on Small-dollar Lending

Thirteen state attorney generals (AG) and the District of Columbia AG have submitted a comment to the Federal Deposit Insurance Corporation (FDIC) in response to the agency’s request for information on small-dollar lending.

Last November, the FDIC announced that it was seeking information on small-dollar lending, specifically in regards to “consumer demand for small-dollar credit products, the supply of small-dollar credit products currently offered by banks, and what the FDIC can do to better enable banks to offer responsible, prudently underwritten credit products to meet consumer demand.”

In the letter, the AGs recommend  “that the FDIC discourage banks from extending small-dollar loans without considering the consumer’s ability to repay” because it may violate “state unfair and deceptive acts or practices laws and the law of unconscionability embedded in state common law and statutes.”

The AGs also recommended that the FDIC encourage banks to consider consumer’s monthly expenses when evaluating their ability to pay. Recurring debt obligations and necessary living expenses were given as examples of what should be considered as a monthly expense which would hinder a consumer’s ability to repay their entire loan balance.

“We also recommend that the FDIC suggest that banks at least consider the consumer’s capacity to absorb an unanticipated financial event – for instance, in the unexpected event of a loss of income or the added expense of a medical emergency – and, nonetheless, still be able to meet the payments as they become due,” the AGs said.