Yesterday, March 26, the Board of Governors of the Federal Reserve System, the Consumer Financial Protection Bureau, the Federal Deposit Insurance Corporation, the National Credit Union Administration, and the Office of the Comptroller of the Currency released an interagency statement encouraging financial institutions to offer responsible small-dollar loans to both consumers and small businesses facing unexpected expenses or sudden income shortfalls due to the COVID-19 pandemic. The statement is the latest in a series of interagency statements released in recent weeks encouraging banks to work with customers affected by the coronavirus, including a statement providing that banks will receive credit under the Community Reinvestment Act for certain efforts to assist such customers.
Yesterday’s statement notes that the current regulatory framework authorizes banks to offer small-dollar loans through a variety of structures – including open-end lines of credit, closed-end installment loans, or appropriately structured single-payment loans – subject to safety and soundness standards and consumer protection laws. The statement does not clarify what features make a small dollar loan “responsible” in the view of the agencies, but the OCC issued guidance in 2018 addressing that issue for national banks and federal savings banks.
Financial institutions may, but are not required to, consult with their primary federal regulator about small-dollar loan products offered to affected customers. The statement indicates that the agencies are working on future guidance and lending principles for responsible small-dollar lending “in more normalized times.”