Banks Urged to Take On Payday Lenders With Small, Lower-Cost Loans

Banks Urged to Take On Payday Lenders With Small, Lower-Cost Loans
Such borrowers, who often have poor credit, can be kept in the “financial mainstream,” Mr. Horowitz said, if traditional banks
and credit unions would offer small installment loans with safeguards that would protect both the banks and the borrower.
Payday borrowers typically have checking accounts — they must show regular deposits as collateral for the loans —
and many say they would prefer to borrow from their own bank if they could qualify, Mr. Horowitz said.
“Borrowers will choose payday loans,” he said, “if banks aren’t fast.”
Banks are in a good position to offer such loans, if regulators approve, Pew suggested.
Speed is crucial, Mr. Horowitz said, because unless the loans are available quickly
and easily, borrowers will go elsewhere, since they typically seek payday loans when they are in distress.
To make such loans workable for borrowers and profitable for banks, underwriting — the review
that borrowers undergo to determine if they qualify for a loan — should be automated, the report said.