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Journal Article
Alternative small dollar loans: creating sound financial products through innovation and regulation
Low- to moderate-income borrowers need alternatives to payday loans to meet their short-term credit needs. This article provides an overview of consumer demand for smaller loans, and discusses how and why mainstream financial institutions should offer less costly alternatives to traditional payday loans. A two-year FDIC pilot, a smalldollar loan pool in Baltimore, and individual case studies suggest that such lending can be viable and profitable. The article concludes with recommendations for how financial institutions and regulators should support this effort.