Small Dollar Loans and In-School Branching as Entry Points for Reaching Underserved Markets

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Small Dollar Loans and In-School Branching as
Entry Points for Reaching Underserved Markets

• James P. Maloney
• Chairman, Mitchell Bank

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Small Dollar Loan Pilot

• Nature of FDIC Pilot
• FDIC Guidelines issued June 19, 2007 everything
  you need to know.
• www.fdic.gov/news/news/press/2007/pr07052a.html
  Bair, Low-Cost Payday Loans www.aecf.org
• Why encouraged by FDIC
• Why banks would want to do it.

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Common Features of SDLs

• Fully Amortizing Term Loan- 300 to 1000
• Breaking the Cycle of Multiple Renewals and
  Rollovers
• Not to be fee-based overdraft or bounce
  protection
• Streamlined Underwriting, Processing and Decision
  Making
• Traditional Credit Scoring vs. Payday Lender
  Data No credit score/thin file
• Savings Component and suitability

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MITCHELL BANK Payday Alternative Loan
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Regulatory Issues and CRA

• State Consumer Protection Laws/Reg Z and TILA
• Subprime Interagency Guidance/FDIC
• CRA consideration and promise

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Cardinal Bank/ A Sustained Initiative

• Introduced in 2000 and now 8 years old
• Branch operated by 8 to 10 senior students8
  separate classes
• Overcoming trust issues and teaching financial
  literacy
• Over 800 new accounts for unbanked families
• Increase of community based accounts in Main Bank

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CARDINAL BANK

• Background of start up
• Demonstrates importance of partnerships within
  community
• Formal branch application to FDIC and State
  regulators.
• Full service branch vs. school sub accounts
• Students are our Ambassadors to community

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CARDINAL BANK

• Real accounts because we are targeting students
  and their parents
• Bank presence--officers of bank, not just
  teachers
• Separate Board of Directors/Officers of bank
• Students market bank to peers/ Classroom
  presentations

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Cardinal Bank

• New Expansion to formal Finance Class within
  School curriculum
• Students have become the family financial
  advisors
• Student Bankers teaching at elementary schools
• Employment of student bankers after graduation

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