SPARTANBURG, S.C. - Jamie Fulmer, Senior Vice President of Public Affairs at Advance America, one of the nation's leading consumer lenders, released the following statement today following the release of the White House's 2017 budget proposal, which included a proposal to fund a program that would offer small-dollar loans through Community Development Financial Institutions:
"By including government-subsidized small-dollar loans in the President's budget proposal, the Obama Administration affirms the crucial role short-term credit plays in the lives of millions of Americans. Advance America welcomes increased competition in the regulated short-term lending marketplace, as consumers benefit from a wide variety of credit options. However, the proposed small-dollar loan funding represents just one more ill-conceived and unsustainable government lending program destined to needlessly burden American taxpayers. As banks, credit unions and nonprofits have already learned, no lender - public or private - can afford to offer without significant subsidy artificially low-interest small-dollar loans capable of meeting long-term consumer demand. The increasingly competitive lending marketplace is the most viable and effective solution, ensuring all Americans can access cost-competitive, reliable and transparent credit when they need it.
"It appears the Administration is offering a solution in search of a problem, unilaterally eliminating a valued and trusted service and competitive free marketplace based purely on ideology. When taken together with forthcoming short-term lending regulations from Consumer Financial Protection Bureau - which by the Bureau's admission will decimate the industry and which will regulate providers instead of credit products - this proposal is meant to replace private industry with yet another unproven government program."
The proposal is similar to the 2008 pilot program from the Federal Deposit Insurance Corporation (FDIC) that was intended to explore how banks can profitably offer affordable small-dollar loans. The FDIC program aimed to offer loans at interest rates of 18 percent; however, no financial institution was able to successfully and profitably lend at that level. Instead of offering the loans as a competitive product, the FDIC suggested that banks use small-dollar loan programs as "loss-leaders" to establish relationships with customers.