Banks and Short-Term, Small-Dollar Loans: Is Now the Time?
Of Counsel Bob Jaworski wrote an article for Westlaw Journal Bank & Lender Liability in which he discusses short-term payday loans and whether banks should enter this market. Mr. Jaworski provides a general overview of what payday loans are and the alternatives that have been created by banks such as deposit advance products in the past.
The U.S. Bank recently announced a new short-term, small-dollar consumer loan called "Simple Loan." The loan is only available to consumers who maintain a checking account with U.S. Bank and have a credit history. Unlike other payday loan providers, U.S. Bank has indicated it intends to report consumers' data about their loans to credit agencies so borrowers can build their credit history profile.
The introduction of short-term, small-dollar loans by banks have the potential to improve the financial well-being of a large majority of the nation.