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Alternative small dollar loans: creating sound financial products through innovation and regulation

Author

Listed:
  • Chris Giangreco
  • Andrea Kovach
  • Matt Unrath

Abstract

Low- to moderate-income borrowers need alternatives to payday loans to meet their short-term credit needs. This article provides an overview of consumer demand for smaller loans, and discusses how and why mainstream financial institutions should offer less costly alternatives to traditional payday loans. A two-year FDIC pilot, a smalldollar loan pool in Baltimore, and individual case studies suggest that such lending can be viable and profitable. The article concludes with recommendations for how financial institutions and regulators should support this effort.

Suggested Citation

  • Chris Giangreco & Andrea Kovach & Matt Unrath, 2010. "Alternative small dollar loans: creating sound financial products through innovation and regulation," Profitwise, Federal Reserve Bank of Chicago, issue Sep, pages 11-14.
    • Handle: RePEc:fip:fedhpw:y:2010:i:sep:p:11-14
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    File URL: https://web.archive.org/web/20170429172228/https://www.chicagofed.org/~/media/publications/profitwise-news-and-views/2010/pnv-aug2010-reed-final-web-pdf.pdf
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    Keywords

    Dollar; Predatory lending;

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