There are ways to remove bad actors from the industry — such as reinstating the Consumer Financial Protection Bureau’s payday lending rule and banning certain fees and collection practices — without hindering consumers’ access to emergency credit.
The agency's "no-action" letter is intended to provide more regulatory certainty for the bank after it announced a short-term credit product available to checking account customers next year.
Regulators are urging banks to offer small-dollar loans again and lifting existing restrictions on nonbank lenders. But the real challenge is making those loans favorable to consumers without losing money.
Many of its borrowers have struggled to make payments since the pandemic struck, so it is helping them by suspending debt collections and capping rates on new loans at 36%.
Trump-appointed regulators gave the industry the green light to offer installment loans during the pandemic. But with concerns that the light could turn red in 2021, bankers remain extra cautious.
An interagency notice meant to encourage lenders to offer small consumer loans also provides federal agencies too much say on what constitutes “reasonable” pricing.
