FDIC Federal Register Citations

[Federal Register: June 7, 2007 (Volume 72, Number 109)]

[Notices]

[Page 31579-31581]

From the Federal Register Online via GPO Access [wais.access.gpo.gov]

[DOCID:fr07jn07-50]

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FEDERAL DEPOSIT INSURANCE CORPORATION

Agency Information Collection Activities: Proposed Information

Collection; Comment Request

AGENCY: Federal Deposit Insurance Corporation (FDIC).

ACTION: Notice and request for comment.

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SUMMARY: In accordance with the Paperwork Reduction Act of 1995, an

agency may not conduct or sponsor, and the respondent is not required

to respond to, an information collection unless it displays a currently

valid Office of Management and Budget (OMB) control number. The FDIC is

contemplating initiating a two-year pilot program relating to small-

dollar lending by insured depository institutions. Institutions meeting

threshold eligibility requirements may volunteer to participate in the

pilot, and the collection at this first stage would provide certain

basic information as to the institution and its current or proposed

small-dollar lending program. Participating institutions would

thereafter provide certain information to the FDIC about their ongoing

experience with their small-dollar lending program. The collection at

this second stage would provide information on the most effective and

replicable business practices to incorporate affordable small-dollar

loans into effective business models to reach out to underserved

communities and to

[[Page 31580]]

develop new customers for mainstream banking services, whether

consumers who take advantage of such loans migrate into other banking

products, and whether a savings component provides a steady increase in

savings.

DATES: Comments must be submitted on or before August 6, 2007.

ADDRESSES: You may submit comments by any of the following methods:

Agency Web Site: http://http://www.fdic.gov/regulations/laws/federal.

Follow instructions for submitting comments on the Agency Web

Site.

E-mail: Comments@FDIC.gov.

Mail: Leneta Gregorie, Legal Division, Attention:

Comments, Federal Deposit Insurance Corporation, 550 17th Street, NW.,

Washington, DC 20429.

Hand Delivery/Courier: Guard station at the rear of the

550 17th Street Building (located on F Street) on business days between

7 a.m. and 5 p.m. (EST).

All comments should refer to ``Pilot Study of Small Dollar Loan

Programs.'' Copies of comments may also be submitted to the OMB desk

officer for the FDIC, Office of Information and Regulatory Affairs,

Office of Management and Budget, New Executive Office Building,

Washington, DC 20503.

Public Inspection: All comments received will be posted without

change to http://http://www.fdic.gov/regulations/laws/federal including any

personal information provided. Comments may be inspected and

photocopied in the FDIC Public Information Center, 3501 North Fairfax

Drive, Room E-1002, Arlington, VA 22226, between 9 a.m. and 5 p.m.

(EST) on business days. Paper copies of public comments may be ordered

from the Public Information Center by telephone at (877) 275-3342 or

(703) 562-2200.

FOR FURTHER INFORMATION CONTACT: Interested members of the public may

obtain additional information about the collection, including a copy of

the proposed collection and related instructions, without charge, by

contacting Leneta Gregorie at the address identified above or by

calling 202-898-3719.

SUPPLEMENTARY INFORMATION:

Proposal To Seek OMB Approval for the Following New Collection of

Information

Title: Pilot Study of Small-Dollar Loan Programs.

OMB Number: New collection (3064-xxxx).

Frequency of Response: Pilot study application--one-time; Program

evaluation reports--quarterly for two years.

Affected Public: Insured depository institutions that apply for and

are accepted to participate in the pilot study.

Estimated Number of Respondents: Pilot study application--40;

Program evaluation reports--20 to 40.

Estimated time per response: Pilot study application: Estimated

average of 2 hours per respondent. Program evaluation reports:

Estimated average of 5 hours per respondent per quarter during study.

Estimated Total Annual Burden:

Pilot study application: 40 respondents times 2 hours per

respondent = 80 hours.

Program evaluation reports: 20 to 40 respondents times 5 hours per

respondent times 4 (quarterly) collections = 400 to 800 aggregate

hours.

Total burden = 80 + 800 = 880 hours.

General Description of Collection

In recognition of the huge demand for small-dollar, unsecured

loans, as evidenced by the proliferation around the country of payday

lenders, the FDIC, on December 4, 2006, proposed and sought comment on

guidelines for such products (http://www.fdic.gov/news/news/press/2006/pr06107.html

). The proposed guidelines addressed several aspects of

product development, including affordability and streamlined

underwriting. Based on the comments received, the FDIC is in the

process of revising the guidelines for issuance in final form. The

FDIC's goal in issuing the guidance is to encourage state nonmember

banks to offer small-dollar, unsecured loans in a safe and sound manner

that is also cost-effective and responsive to customer needs.

To further encourage the development by insured depository

institutions of small-dollar credit programs, the FDIC is contemplating

conducting a pilot study to identify and evaluate the key components of

small-dollar loan programs, with the goal of identifying the most

effective and replicable business plans for bankers, determining the

degree to which customers of such programs migrate into other banking

products, assessing the extent to which a savings component results in

increased savings, and identifying program features which can be deemed

``best practices.'' Programs selected for the pilot may be either

already in existence at an insured institution or developed

specifically for participation in the study. The pilot study will

require collection of data from applicant institutions to determine

eligibility as well as quarterly collection (for two years) of data

from participating institutions, to the extent such data are not

currently included in the Call Reports or other standard regulatory

reports, to evaluate program success.

Pilot Study Application: Volunteers for the pilot program will be

screened to ensure that they meet certain basic eligibility

requirements. A volunteer will likely be asked to demonstrate, by

certification or otherwise, that it meets the following threshold

requirements: A composite ``1'' or ``2'' rating on its most recent

Safety and Soundness examination and a Management rating of ``1'' or

``2''; satisfactory policies and procedures in all areas, including

lending, audits, aggregate risk, internal controls, liquidity, interest

rate risk, compliance, BSA/AML; a composite ``1'' or ``2'' rating on

its most recent Compliance examination; at least a ``Satisfactory''

rating on its most recent Community Reinvestment Act (CRA) evaluation;

the fact that it is not currently subject to a formal or informal

enforcement action or the subject of an investigation or inquiry.

Each volunteer interested in participating in the study will also

be asked to provide the following (or similar) information:

Whether it already offers small-dollar loans and, if so,

the terms of such loans;

If it proposes to initiate a small-dollar loan program,

the proposed structure of the program;

The current or proposed size of the program;

How it proposes to market the program;

How it envisions the small-dollar loan application

process;

What it proposes as underwriting criteria; and

Proposed interest rates and fees.

Key features of a preferred small-dollar lending program might

include loan amounts of up to $1,000; amortization periods longer than

a single pay cycle and up to 36 months for closed-end credit, or

minimum payments which reduce principal (i.e., do not result in

negative amortization) for open-end credit; annual percentage rates

(APR) below 36 percent; no prepayment penalties; origination and/or

maintenance fees limited to the amount necessary to cover actual costs;

and a savings component.

Descriptions provided by eligible volunteers will be reviewed by a

FDIC selection panel. To provide more meaningful information about the

pilot's success, the institutions selected to participate will likely

consist of various sized institutions and in widely dispersed

geographic locations.

Program evaluation reports: A volunteer must agree to the

monitoring

[[Page 31581]]

and data collection aspects of the pilot program. For this purpose, the

FDIC anticipates that the following (or similar) information will be

collected from participating institutions on a quarterly basis for two

years:

1. Information about the loans in the Program

a. The total number and total dollar amount of loans.

b. Average loan term and average dollar size of loans.

c. Average interest rates charged, average fees levied, and average

calculations of APR (as required by the Truth-in-Lending Act).

d. Aggregate delinquency, charge off, and workout refinancing data.

2. Information about the business value of the Program

a. Profitability and/or break even data for the overall Program.

b. Profitability of the overall customer relationship (especially

if the customer migrated into other products)

c. Information regarding whether customers of the Program migrated

to other bank products.

3. Information about the benefit to consumers

a. The total number and total dollar amount of linked savings

accounts opened as part of the Program.

b. Information as to duration and withdrawal rates of the linked

savings accounts.

c. Information regarding whether customers of the Program continued

to use payday loans or other high-cost debt products.

The preferred method for collecting these data is electronic

submission through the existing FDICconnect data interface system to

minimize burden on respondents, with participating institutions

submitting the data within 40 calendar days of the end of each quarter.

The study will conform to privacy rules and will not request any

information that could be used to identify individual bank customers,

such as name, address, or account number. All data from participating

insured institutions will remain confidential. It is the intent of the

FDIC to publish only general findings of the study.

Benefits to Institutions Participating in the Pilot

As indicated above, the study is being conducted on a volunteer

basis. It is anticipated, however, that institutions participating in

the study will realize some benefits. A state non-member bank that

establishes a loan program that provides small, unsecured consumer

loans that are consistent with the Affordable Small-Dollar Loan

Guidelines would warrant favorable consideration by the FDIC under the

CRA as an activity responsive to the credit needs of its community. It

is anticipated that other institutions will also likely be entitled to

similar favorable consideration after review by their primary federal

regulator. Moreover, programs that transition low or moderate income

borrowers from higher cost loans to lower cost loans are particularly

responsive to community needs. Consequently, state non-member banks

offering lower cost alternatives to such borrowers will also be viewed

by the FDIC as particularly responsive in the CRA examination and

similarly, other institutions upon review by their primary federal

regulator.

Where small-dollar loan products are combined with a low-cost

savings account, institutions may also qualify for favorable

consideration for providing community development services.

Institutions can potentially use the small-dollar loan pilot to tap

into new markets by expanding relationships with individuals who

currently may not be fully utilizing the mainstream financial system.

An intangible benefit that may accrue to institutions participating in

the small-dollar pilot is the community goodwill that will likely be

created as a result of offering consumers credit products with

significant savings over payday loan fees.

Request for Comment

Comments are invited on: (a) Whether the collection of information

is necessary for the proper performance of the FDIC's functions,

including whether the information has practical utility; (b) the

accuracy of the estimates of the burden of the information collection;

(c) ways to enhance the quality, utility, and clarity of the

information to be collected; (d) ways to minimize the burden of the

information collection on respondents, including through the use of

automated collection techniques or other forms of information

technology; and (e) estimates of capital or start-up costs, and costs

of operation, maintenance and purchase of services to provide the

information.

Dated at Washington, DC, this 1st day of June, 2007.

Federal Deposit Insurance Corporation.

Valerie J. Best,

Assistant Executive Secretary.

[FR Doc. E7-11005 Filed 6-6-07; 8:45 am]

BILLING CODE 6714-01-P