Senator Sherrod Brown, ranking member of the Senate Banking Committee, has sent a letter to President Obama that asks the President to prioritize funding in his FY 2017 budget proposal for programs in Title XII of the Dodd-Frank Act that are intended to assist lower income borrowers. Title XII has not yet been implemented.
The programs authorized by Sections 1205 and 1206 of Title XII provide federal grants and other financial support to “eligible entities” to enable them to provide “low-cost, small loans to consumers that will provide alternatives to more costly small dollar loans.” “Eligible entities” include community development financial institutions, federally-insured depository institutions, and state, local, or tribal government entities.
Community development financial institutions (CDFI) are financial institutions that provide credit and financial services to underserved markets and populations that are certified by the Treasury Department’s Community Development Financial Institutions Fund (CDFI Fund) which provides funds to CDFIs through various programs. Section 1206 would establish limits on a CDFI’s small dollar loan program supported by the CDFI Fund, including that the loans may not exceed $2500, must be repayable in installments, and have no prepayment penalty.
Senator Brown was among a group of U.S. Senators who sent a letter to Director Cordray in June 2015 urging him “to issue the strongest possible [payday lending] rules to end the damaging effects of predatory lending.”
Title XII also authorizes a program intended to expand access of low- and moderate-income individuals to the mainstream banking system. Under Section 1204, the Treasury Department can provide grants and other financial support to promote initiatives designed to enable such individuals to establish accounts in federally-insured depository institutions.