Lalita Clozel
speaker
117 appearances
3 recordings
1 series
first heard Mar 2018
last heard Sep 2019
Lalita Clozel’s voice in public audio — every appearance, attributed to the second.
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Appearances
Right.
So under the Obama administration, banking regulators were concerned that some of these loans were higher interest rate and could cause some consumer protection issues.
And so that they imposed pretty strict guidelines on making those loans.
And that ended up basically discouraging banks from making the loan.
So a lot of them discontinued them.
Now, under the current administration, banking regulators are trying to encourage banks to make those loans again.
And their argument is that it would help provide an alternative to consumers inside the banking space that's a cheaper type of loan than probably the ones that they would get from payday lenders.
And you also would encourage people to stay in the banking system and end up developing their credit history.
and overall get back on a sounder financial footing.
Right.
So there's always going to be underwriting standards and the borrowers are going to have to make sure that the borrower can pay back the loan.
But the difficulty for banks is that it's hard to make really small loans.
We're talking about a few hundred to a few thousand dollars.
that can help people in the event of an emergency or to pay bills or cover the time in between their paychecks.
It's hard to make those smaller loans while complying with pretty strict underwriting standards because that just increases the cost of making each loan.
And since they're smaller, it's going to be a very low margin.
And so as a result, you'd have to have a relatively high interest rate for each loan.
And that's been just the tension there with having banks making small dollar loans.
So the current regulators are trying to encourage banks to get back into the space.
And they've put out some new guidelines.
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