SR 20-14: Interagency Lending Principles for Making Responsible Small-Dollar Loans

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SR 20-14 / CA 20-8: Interagency Lending Principles for Making Responsible Small-Dollar Loans

BOARD OF GOVERNORS OF THE FEDERAL RESERVE SYSTEM WASHINGTON, D.C. 20551

DIVISION OF SUPERVISION AND REGULATION

DIVISION OF CONSUMER AND COMMUNITY AFFAIRS

SR 20-14 / CA 20-8

May 20, 2020

TO THE OFFICER IN CHARGE OF SUPERVISION AT EACH FEDERAL RESERVE BANK AND TO INSTITUTIONS SUPERVISED BY THE FEDERAL RESERVE

SUBJECT:

Interagency Lending Principles for Making Responsible Small-Dollar Loans

Applicability: This letter is relevant to all institutions supervised by the Federal Reserve.

On May 20, 2020, the Federal Reserve, the Federal Deposit Insurance Corporation, the Office of the Comptroller of the Currency, and the National Credit Union Administration (collectively, the "agencies") issued the attached "Interagency Lending Principles for Making Responsible Small-Dollar Loans" ("Principles") to encourage supervised banks, savings associations and credit unions (collectively, "financial institutions") to offer responsible small-dollar loans to their customers for both consumer and small business purposes. 1 The agencies encourage financial institutions to refer to the Principles when implementing any reasonable policies and sound risk management practices for responsible small-dollar lending activities. 2 Additional Federal Reserve resources that financial institutions may find helpful are listed at the end of this letter.

Reserve Banks are asked to distribute this letter to the Federal Reserve-supervised financial institutions in their districts, as well as to their supervisory and examination staff. If Federal Reserve-supervised financial institutions have questions about the information set forth in this letter or the Principles, they are encouraged to contact their primary contact at the responsible Reserve Bank. In addition, questions may be sent via the Board’s public website. 3

signed by Michael S. Gibson Director Division of Supervision and Regulation

signed by Eric S. Belsky Director Division of Consumer and Community Affairs

Attachments:

Joint Release, " Interagency Lending Principles for Making Responsible Small-Dollar Loans " (May 20, 2020) .

Cross References:

12 CFR 208, Appendix D-1, Interagency Guidelines Establishing Standards for Safety and Soundness

SR letter 20-7 / CA letter 20-5, "Joint Statement Encouraging Responsible Small-Dollar Lending in Response to COVID-19"

CA letter 19-11, "Interagency Statement on the Use of Alternative Data in Credit Underwriting"

SR letter 16-11, "Supervisory Guidance for Assessing Risk Management at Supervised Institutions with Total Consolidated Assets Less than $50 Billion"

SR letter 13-19 / CA letter 13-21, "Guidance on Managing Outsourcing Risk"

SR letter 95-51, "Rating the Adequacy of Risk Management Processes and Internal Controls at State Member Banks and Bank Holding Companies"

Additional Resources

Consumer Compliance Supervision Bulletin , July 2018 (see section on small-dollar loan pricing and fair lending considerations) at: https://www.federalreserve.gov/publications/2018-july-consumer-compliance-supervision-bulletin.htm

Federal Reserve Board Innovation Website (resource for stakeholders interested in engaging with the System on innovation-related matters) at: https://www.federalreserve.gov/aboutthefed/innovation.htm

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Last Update: May 20, 2020