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Action Campaigns

Alternative Small Dollar Consumer Loan Products and Policies

The Alternative Small Dollar Loan Products Campaign was launched because of the proliferation of payday and auto title lending locations in Texas – over 2,800 locations – with no meaningful state oversight or regulation. These lending businesses charge annual percentage rates upwards of 500 percent with loan terms that often result in further deterioration in individual and family financial stability. The appeal of the loans is that they are quick and easy to obtain. The problem with the loans is that they are difficult and expensive to pay off.

Our coordinated efforts throughout the last year and addressed during the RAISE Texas Action Summit in November 2009, reflect continued progress in creating more options for families needing short-term cash and improving regulation of payday and auto lending in Texas.

Following are the action steps that came from the November 2009 Action Summit:

Product Action Steps

Current Products

  • Propose a reasonably structured and priced payday and auto title loan alternative to the industry for consideration.
  • Propose that CSOs clearly disclose a purported policy to negotiate a longer-term amortizing loan term for those customers that are unable to pay their loan back in two weeks.
  • Promote SHARE loans currently being offered as viable alternatives to high-cost consumer loans. This action step will involve research of existing programs and then matching these programs to community organizations/agencies working directly with clients who need short-term loans.
  • Longer-term objective: Use the results of the FDIC Small Dollar Loan Pilot Program to determine successful mainstream bank models (best practices) and promote their use to Texas banks and credit unions.

Potential Products

  • Support the efforts of the Texas Credit Union League’s REAL Solutions payday loan product that will launch in early 2010. Encourage participation by local credit unions throughout the state and help market each program offered.
  • Support the efforts of local programs to create alternatives to high-cost small dollar loans and explore a state-wide program based on successful models.
  • Connect community-based organizations to local financial institutions willing to offer small dollar loans to their clients.
  • Work with the “Bank on” campaigns and financial coaching models to promote viable options for families that need it most.

Policy Action Steps

  • Continue to promote fair small dollar lending standards.
  • Continue to promote data reporting requirements for Credit Services Organizations.

Our goal, coming out of each summit, is to develop a concrete and achievable strategy to build on the momentum of the previous year. We will strive to create meaningful growth in the loan options available to families. We will also push ahead on the path towards regulatory and legal reforms of an industry that has too long been subsidized by the lack of accountability under Texas law.

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