Commentary: Revisiting Small Loans Rules Crucial to Maintaining Access to Credit for Vulnerable Consumers

In considering reforms to the small-dollar loan industry, lawmakers must tread carefully to avoid limiting credit access for the most vulnerable populations, writes the American Consumer Institute’s Liam Sigaud. The Consumer Financial Protection Bureau recently announced that it will re-evaluate its proposed rule requiring lenders to certify that the recipient of a loan is able to repay it. This underwriting provision was slated for implementation later this year. Sigaud argues that minimal regulation and vigorous competition would help consumers more than government regulations that favor large, incumbent lenders over promising startups. He adds that the majority of consumers understand the terms and are able to pay back their loans. While continuing to educate consumers is important, Sigaud concludes, “millions of Americans would be worse off without access to small-dollar loans.”

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