For Banks, Little Progress on Loans to the Unbanked

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By Kevin Wack

Despite years of encouragement by their regulators to provide small-dollar loans to people without access to traditional forms of credit, banks largely remain reluctant to enter the field.

At a congressional hearing Thursday, the Federal Deposit Insurance Corp. and the Office of the Comptroller of the Currency could point to little progress on the issue since 2009.

If banks are considering entering the small-dollar loan business, they will also need to pay close attention to a number of innovative firms that are providing an alternative to payday lenders.

For example, Flexwage Solutions LLC offers a product that makes available wages that workers have earned but not yet been paid. Customers pay a flat fee for the predisbursement of their wages. Because there is no loan, they have nothing to repay.