Yesterday, five federal financial regulatory agencies issued a joint statement encouraging banks, savings associations and credit unions to offer responsible small-dollar loans to consumers and small businesses to help them get through the coronavirus pandemic.
The statement was issued in a cooperative effort of the Board of Governors of the Federal Reserve System, Consumer Financial Protection Bureau, Federal Deposit Insurance Corporation, National Credit Union Administration and Office of the Comptroller of the Currency
“The regulators continue to call on financial institutions to make small dollar loans to people and business that need help managing their finances that have been upended by the pandemic,” said Mike Lee, LSCU director of regulator advocacy. “While the regulators emphasize the importance of considering the safety and soundness concerns in making these loans, this is really an opportunity for credit unions to shine and distinguish themselves from banks by doing what they’ve always done, helping people manage their financial lives, particularly in times of crisis.“
The agencies also suggests that financial institutions work with borrowers to keep them from getting caught in a cycle of debt.
The agencies state that loans should be offered in a manner that provides fair treatment of consumers, complies with applicable laws and regulations, and is consistent with safe and sound practices.
For borrowers who experience unexpected circumstances and cannot repay a loan as structured, banks, savings associations and credit unions are further encouraged to consider workout strategies designed to help borrowers to repay the principal of the loan while mitigating the need to re-borrow.
In addition to today’s statement, the agencies are working on future guidance and lending principles for responsible small-dollar loans to facilitate the ability of banks, credit unions, and saving associations to more effectively meet the ongoing credit needs of their customers, members, and communities.
Read the official document here.