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Federal Deposit Insurance Corporation (FDIC).
Notice and request for comment.
In accordance with the Paperwork Reduction Act of 1995, an agency may not conduct or sponsor, and the respondent is not required to respond to, an information collection unless it displays a currently valid Office of Management and Budget (OMB) control number. The FDIC is contemplating initiating a two-year pilot program relating to small-dollar lending by insured depository institutions. Institutions meeting threshold eligibility requirements may volunteer to participate in the pilot, and the collection at this first stage would provide certain basic information as to the institution and its current or proposed small-dollar lending program. Participating institutions would thereafter provide certain information to the FDIC about their ongoing experience with their small-dollar lending program. The collection at this second stage would provide information on the most effective and replicable business practices to incorporate affordable small-dollar loans into effective business models to reach out to underserved communities and to Start Printed Page 31580develop new customers for mainstream banking services, whether consumers who take advantage of such loans migrate into other banking products, and whether a savings component provides a steady increase in savings.
Comments must be submitted on or before August 6, 2007.
You may submit comments by any of the following methods:
- Agency Web Site: http://www.fdic.gov/regulations/laws/federal. Follow instructions for submitting comments on the Agency Web Site.
- E-mail: Comments@FDIC.gov.
- Mail: Leneta Gregorie, Legal Division, Attention: Comments, Federal Deposit Insurance Corporation, 550 17th Street, NW., Washington, DC 20429.
- Hand Delivery/Courier: Guard station at the rear of the 550 17th Street Building (located on F Street) on business days between 7 a.m. and 5 p.m. (EST).
All comments should refer to “Pilot Study of Small Dollar Loan Programs.” Copies of comments may also be submitted to the OMB desk officer for the FDIC, Office of Information and Regulatory Affairs, Office of Management and Budget, New Executive Office Building, Washington, DC 20503.
Public Inspection: All comments received will be posted without change to http://www.fdic.gov/regulations/laws/federal including any personal information provided. Comments may be inspected and photocopied in the FDIC Public Information Center, 3501 North Fairfax Drive, Room E-1002, Arlington, VA 22226, between 9 a.m. and 5 p.m. (EST) on business days. Paper copies of public comments may be ordered from the Public Information Center by telephone at (877) 275-3342 or (703) 562-2200.Start Further Info
FOR FURTHER INFORMATION CONTACT:
Interested members of the public may obtain additional information about the collection, including a copy of the proposed collection and related instructions, without charge, by contacting Leneta Gregorie at the address identified above or by calling 202-898-3719.End Further Info End Preamble Start Supplemental Information
Proposal To Seek OMB Approval for the Following New Collection of Information
Title: Pilot Study of Small-Dollar Loan Programs.
OMB Number: New collection (3064-xxxx).
Frequency of Response: Pilot study application—one-time; Program evaluation reports—quarterly for two years.
Affected Public: Insured depository institutions that apply for and are accepted to participate in the pilot study.
Estimated Number of Respondents: Pilot study application—40; Program evaluation reports—20 to 40.
Estimated time per response: Pilot study application: Estimated average of 2 hours per respondent. Program evaluation reports: Estimated average of 5 hours per respondent per quarter during study.
Estimated Total Annual Burden:
Pilot study application: 40 respondents times 2 hours per respondent = 80 hours.
Program evaluation reports: 20 to 40 respondents times 5 hours per respondent times 4 (quarterly) collections = 400 to 800 aggregate hours.
Total burden = 80 + 800 = 880 hours.
General Description of Collection
In recognition of the huge demand for small-dollar, unsecured loans, as evidenced by the proliferation around the country of payday lenders, the FDIC, on December 4, 2006, proposed and sought comment on guidelines for such products (http://www.fdic.gov/news/news/press/2006/pr06107.html). The proposed guidelines addressed several aspects of product development, including affordability and streamlined underwriting. Based on the comments received, the FDIC is in the process of revising the guidelines for issuance in final form. The FDIC's goal in issuing the guidance is to encourage state nonmember banks to offer small-dollar, unsecured loans in a safe and sound manner that is also cost-effective and responsive to customer needs.
To further encourage the development by insured depository institutions of small-dollar credit programs, the FDIC is contemplating conducting a pilot study to identify and evaluate the key components of small-dollar loan programs, with the goal of identifying the most effective and replicable business plans for bankers, determining the degree to which customers of such programs migrate into other banking products, assessing the extent to which a savings component results in increased savings, and identifying program features which can be deemed “best practices.” Programs selected for the pilot may be either already in existence at an insured institution or developed specifically for participation in the study. The pilot study will require collection of data from applicant institutions to determine eligibility as well as quarterly collection (for two years) of data from participating institutions, to the extent such data are not currently included in the Call Reports or other standard regulatory reports, to evaluate program success.
Pilot Study Application: Volunteers for the pilot program will be screened to ensure that they meet certain basic eligibility requirements. A volunteer will likely be asked to demonstrate, by certification or otherwise, that it meets the following threshold requirements: A composite “1” or “2” rating on its most recent Safety and Soundness examination and a Management rating of “1” or “2”; satisfactory policies and procedures in all areas, including lending, audits, aggregate risk, internal controls, liquidity, interest rate risk, compliance, BSA/AML; a composite “1” or “2” rating on its most recent Compliance examination; at least a “Satisfactory” rating on its most recent Community Reinvestment Act (CRA) evaluation; the fact that it is not currently subject to a formal or informal enforcement action or the subject of an investigation or inquiry.
Each volunteer interested in participating in the study will also be asked to provide the following (or similar) information:
- Whether it already offers small-dollar loans and, if so, the terms of such loans;
- If it proposes to initiate a small-dollar loan program, the proposed structure of the program;
- The current or proposed size of the program;
- How it proposes to market the program;
- How it envisions the small-dollar loan application process;
- What it proposes as underwriting criteria; and
- Proposed interest rates and fees.
Key features of a preferred small-dollar lending program might include loan amounts of up to $1,000; amortization periods longer than a single pay cycle and up to 36 months for closed-end credit, or minimum payments which reduce principal (i.e., do not result in negative amortization) for open-end credit; annual percentage rates (APR) below 36 percent; no prepayment penalties; origination and/or maintenance fees limited to the amount necessary to cover actual costs; and a savings component.
Descriptions provided by eligible volunteers will be reviewed by a FDIC selection panel. To provide more meaningful information about the pilot's success, the institutions selected to participate will likely consist of various sized institutions and in widely dispersed geographic locations.
Program evaluation reports: A volunteer must agree to the monitoring Start Printed Page 31581and data collection aspects of the pilot program. For this purpose, the FDIC anticipates that the following (or similar) information will be collected from participating institutions on a quarterly basis for two years:
1. Information about the loans in the Program
a. The total number and total dollar amount of loans.
b. Average loan term and average dollar size of loans.
c. Average interest rates charged, average fees levied, and average calculations of APR (as required by the Truth-in-Lending Act).
d. Aggregate delinquency, charge off, and workout refinancing data.
2. Information about the business value of the Program
a. Profitability and/or break even data for the overall Program.
b. Profitability of the overall customer relationship (especially if the customer migrated into other products)
c. Information regarding whether customers of the Program migrated to other bank products.
3. Information about the benefit to consumers
a. The total number and total dollar amount of linked savings accounts opened as part of the Program.
b. Information as to duration and withdrawal rates of the linked savings accounts.
c. Information regarding whether customers of the Program continued to use payday loans or other high-cost debt products.
The preferred method for collecting these data is electronic submission through the existing FDIC connect data interface system to minimize burden on respondents, with participating institutions submitting the data within 40 calendar days of the end of each quarter. The study will conform to privacy rules and will not request any information that could be used to identify individual bank customers, such as name, address, or account number. All data from participating insured institutions will remain confidential. It is the intent of the FDIC to publish only general findings of the study.
Benefits to Institutions Participating in the Pilot
As indicated above, the study is being conducted on a volunteer basis. It is anticipated, however, that institutions participating in the study will realize some benefits. A state non-member bank that establishes a loan program that provides small, unsecured consumer loans that are consistent with the Affordable Small-Dollar Loan Guidelines would warrant favorable consideration by the FDIC under the CRA as an activity responsive to the credit needs of its community. It is anticipated that other institutions will also likely be entitled to similar favorable consideration after review by their primary federal regulator. Moreover, programs that transition low or moderate income borrowers from higher cost loans to lower cost loans are particularly responsive to community needs. Consequently, state non-member banks offering lower cost alternatives to such borrowers will also be viewed by the FDIC as particularly responsive in the CRA examination and similarly, other institutions upon review by their primary federal regulator.
Where small-dollar loan products are combined with a low-cost savings account, institutions may also qualify for favorable consideration for providing community development services. Institutions can potentially use the small-dollar loan pilot to tap into new markets by expanding relationships with individuals who currently may not be fully utilizing the mainstream financial system. An intangible benefit that may accrue to institutions participating in the small-dollar pilot is the community goodwill that will likely be created as a result of offering consumers credit products with significant savings over payday loan fees.
Request for Comment
Comments are invited on: (a) Whether the collection of information is necessary for the proper performance of the FDIC's functions, including whether the information has practical utility; (b) the accuracy of the estimates of the burden of the information collection; (c) ways to enhance the quality, utility, and clarity of the information to be collected; (d) ways to minimize the burden of the information collection on respondents, including through the use of automated collection techniques or other forms of information technology; and (e) estimates of capital or start-up costs, and costs of operation, maintenance and purchase of services to provide the information.Start Signature
Dated at Washington, DC, this 1st day of June, 2007.
Federal Deposit Insurance Corporation.
Valerie J. Best,
Assistant Executive Secretary.
[FR Doc. E7-11005 Filed 6-6-07; 8:45 am]
BILLING CODE 6714-01-P