The Office of the Comptroller of the Currency (OCC) recently opened the doors for traditional financial institutions to provide short-term, smaller loans to consumers who are often left with little choice but to turn to payday loan services. The oft reviled payday loan industry is a particularly large source of complaints to the Consumer Financial Protection Bureau (CFPB), specifically with regards to predatory lending and placing vulnerable consumers in a revolving cycle of high-interest loans.
Now, banks may be able to provide short-term financial relief to their customers, potentially alleviating risks of home and auto loan defaults elsewhere in their businesses. Borrower eligibility issues are still likely to be of concern, but this could be a positive first step in reforming short-term loan problems.
Consumers who rely on payday loans to fill their budget gaps may have a new option to turn to: traditional banks. National banks just received the go-ahead to serve that market from their regulator, the Office of the Comptroller of the Currency. On Wednesday, Comptroller of the Currency Joseph Otting called for national banks and federal savings associations to step into the short-term, small-dollar installment loan market.