U.S. Rep. Young Kim (R-CA) introduced legislation this week that seeks to codify policies related to small-dollar loans.
Federal agencies, in May of 2020, issued guidance for responsible small-dollar loans, allowing banks and credit unions to offer automated small loans and create responsible lending principles.
Kimʻs bill, the Small Dollar Loan Certainty Act (H.R. 8356), essentially put this guidance into law, providing certainty to the small-dollar market and protecting consumers.
“Policies from Congress should make life easier for Americans, not harder. The Small Dollar Loan Certainty Act will provide clear principles for financial institutions providing small-dollar loans and ensure working Americans can access the capital they need,” Kim said.
Specifically, the Small Dollar Loan Certainty Act would allow covered entities – including insured depository institutions or federal credit unions – to offer small-dollar credit products to consumers by:
• Establishing requirements for providing small-dollar installment loans and lines of credit;
• Compelling the use of a robust underwriting process to determine creditworthiness;
• Requiring funds to be distributed to consumers within five days of approval; and
• Banning fees against consumers associated with a small-dollar credit product.
“I am committed to doing my part on the Financial Services Committee to reduce regulatory costs, defend consumer rights, and protect the American dream for future generations,” Kim added.