ABA Supports Strengthening CDFI Fund’s Small Dollar Loan Program

In a comment letter submitted on Friday, the American Bankers Association expressed support for strengthening the Community Development Financial Institutions Fund’s Small Dollar Loan Program, which provides grants to eligible recipients—either a CDFI or a partnership between a CDFI and another depository institution—for loan loss reserves and technical assistance, to support small dollar loan programs.

ABA expressed support for the SDL program and the CDFI Fund’s mission to expand consumer access to affordable credit. “[B]anks are well situated to meet consumers’ needs for affordable short-term credit. These loans not only help consumers navigate liquidity shortfalls, but also provide a pathway for consumers to access other bank products,” the association noted. “When loans are repaid as agreed, consumers can build or improve their credit scores and graduate to other credit products.”

ABA recommended the CDFI Fund streamline its application by asking only for the number and dollar amount of small dollar loans that the applicant made, and for the number and dollar amount of loans that the applicant had to write off, for the preceding two years. ABA also offered feedback on the performance metrics that banks should track on the small dollar loans they make under the program.