The Center for Responsible Lending (CRL) and the National Consumer Law Center (on behalf of its low income clients) (NCLC), joined by Americans for Financial Reform Education Fund, the Leadership Conference for Civil and Human Rights, and NAACP, submit these comments in response to the FDIC’s request for information (RFI) on small-dollar lending.

We appreciate the FDIC’s ongoing work to encourage banks to meet consumers’ needs and to promote a more inclusive banking system. Indeed, we are very concerned about the persisting racial disparities the new FDIC unbanked/underbanked survey underscores, and we appreciate that the FDIC continues to shine a light on these disparities.

At the same time, we read with concern the RFI’s emphasis on what the FDIC’s unbanked/underbanked report deems “unmet demand” for consumer credit. The metrics used to measure “unmet demand” do not appear to be strong indicators of actual capacity to take on additional credit. Credit cannot make up for a fundamental lack of income or consistent incapacity to meet expenses, particularly for the borrowers with damaged credit for whom high-cost bank products tend to be designed. Irresponsible loan products merely put these consumers in a cycle of debt, exacerbating, not helping their situation.

To ensure that their products are responsible and indeed measure true capacity to handle additional credit, banks must adhere to long-established sound banking principles. Those we emphasize here are (i) opposition to rent-a-bank schemes where banks rent their charters to nonbank lenders to circumvent state law; (ii) lending based on ability-to-repay, which requires consideration of both income and expenses; (iii) and responsible pricing that does not exceed 36% APR.

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