The small-dollar loan industry: a new era of regulatory reform-and emerging competition?

摘要

The “small-dollar loan”, or “payday lending”, industry offers a short-term, unsecured lump-sum loan (usually under $500) to U.S. borrowers who promise to repay the loan. Loan pricing has attracted intense scrutiny of the industry from both advocates and critics alike, as these loans have a short term (“next payday”) to maturity and the cost of borrowing, expressed as an annual percentage rate, is nearly 400%. However, due to a new industry regulatory environment emerging at the federal level, a myriad of innovative financial (“fintech”) opportunities emanating from traditional banking and credit unions will be available to the underserved population. Furthermore, increased product and price competition will likely reduce the predatory non-traditional lending presence in the industry.