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

Small Dollar Loans and In-School Branching as Entry Points for Reaching Underserved Markets . James P. Maloney Chairman, Mitchell Bank. Small Dollar Loan Pilot. Nature of FDIC Pilot FDIC Guidelines issued June 19, 2007– everything you need to know.

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

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  1. Small Dollar Loans and In-School Branching as Entry Points for Reaching Underserved Markets James P. Maloney Chairman, Mitchell Bank Advisory Committee Meeting on Economic Inclusion

  2. 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. Advisory Committee Meeting on Economic Inclusion

  3. 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” Advisory Committee Meeting on Economic Inclusion

  4. MITCHELL BANK: Payday Alternative Loan

  5. Regulatory Issues and CRA • State Consumer Protection Laws/Reg Z and TILA • Subprime Interagency Guidance/FDIC • CRA consideration and promise Advisory Committee Meeting on Economic Inclusion

  6. Cardinal Bank/ A Sustained Initiative • Introduced in 2000 and now 8 years old • Branch operated by 8 to 10 senior students—8 separate classes • Overcoming trust issues and teaching financial literacy • Over 800 new accounts for unbanked families • Increase of community based accounts in Main Bank Advisory Committee Meeting on Economic Inclusion

  7. Advisory Committee Meeting on Economic Inclusion

  8. Advisory Committee Meeting on Economic Inclusion

  9. 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 Advisory Committee Meeting on Economic Inclusion

  10. 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 Advisory Committee Meeting on Economic Inclusion

  11. 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 Advisory Committee Meeting on Economic Inclusion

  12. Advisory Committee Meeting on Economic Inclusion

  13. Advisory Committee Meeting on Economic Inclusion

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