Regulators Set Out Small-Dollar Lending Guidelines for Banks

Federal regulators released detailed guidance for banks to offer small-dollar products with stringent underwriting requirements and other measures aimed at making sure consumers don’t fall into debt cycles that characterize payday loans.

The Federal Deposit Insurance Corp., the Federal Reserve and the Office of the Comptroller of the Currency said the guidance released yesterday was intended to allow banks to meet their customers “ongoing needs for credit” from unexpected or temporary income shortfalls and expenses. The guidance mentions periods of “economic stress, natural disasters, or other extraordinary circumstances such as the public health emergency created by COVID-19.”

The guidance, which ...