Demand for same day loans is tremendous, FDIC says

The logo of the United States Government Accountability Office.

The Government Accountability Office says banks can't effectively offer small-dollar loans. (Photo Credit: CC BY-ND/DRScoundrels)

There is a “tremendous demand” for unsecured personal loans in the U.S., says FDIC Chairwoman Sheila Bair. This means small-dollar loans are attractive to consumers and to mainstream financial institutions like banks and credit unions. Banks have tried to get in on the same day loans origination action – but not without complications, says a Government Accountability Office report.

Payday loan alternatives – and the banks that can’t deliver them

Due to more stringent terms and fee structures, payday loan alternatives offered by most banks and credit unions are a completely different animal than personal loans from a small lending outlet. The GAO suggest that the Dodd-Frank Act and other FDIC changes in recent months may increase traditional financial institutions’ willingness to offer same day loans, but the results may not be what banks expect:

“Recent statutory and regulatory changes and FDIC initiatives may encourage more institutions to offer small-dollar loan alternatives to payday loans or expand their availability, but many consumers may still chose to use payday loans for their wide availability and relative lack of eligibility,” says the GAO report.

A two-year FDIC pilot program illustrated that without the involvement of charitable organizations or government subsidies, banks and credit unions have been unable to popularize payday loan alternatives. Extensive underwriting requirements also tended to exclude the customer base that most wanted access to personal loans.

Same day loans will not exclude you from a government job

The notion that taking out same day loans is harmful to one’s financial reputation is disproved in the Government Accountability Office report. Federal agencies like the Department of Homeland Security, Transportation Security Administration and even the Federal Bureau of Investigations put applicants through an intense employment screening process that includes a thorough financial history. Credit reports are run and other financial evaluation tools are used.

According to the GAO, screening agencies stressed that whether or not applicants to high security clearance positions had used short term loans was not a determining factor in the hiring process. The presence of risky patterns of financial behavior is important, however, which underscores the important of financial responsibility – for government employees and consumers in general. If banks and credit unions could ever free themselves from the policy maze and judge same day loan applicants over a more broad range of financial responsibility, perhaps the institutions could sell personal loans directly to consumers.


Community Financial Services Association of America

Government Accountability Office

Don’t live beyond your means, even with payday loans

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