Banks Urged to Take On Payday Lenders With Small, Lower-Cost Loans<br />Such borrowers, who often have poor credit, can be kept in the “financial mainstream,” Mr. Horowitz said, if traditional banks<br />and credit unions would offer small installment loans with safeguards that would protect both the banks and the borrower.<br />Payday borrowers typically have checking accounts — they must show regular deposits as collateral for the loans —<br />and many say they would prefer to borrow from their own bank if they could qualify, Mr. Horowitz said.<br />“Borrowers will choose payday loans,” he said, “if banks aren’t fast.”<br />Banks are in a good position to offer such loans, if regulators approve, Pew suggested.<br />Speed is crucial, Mr. Horowitz said, because unless the loans are available quickly<br />and easily, borrowers will go elsewhere, since they typically seek payday loans when they are in distress.<br />To make such loans workable for borrowers and profitable for banks, underwriting — the review<br />that borrowers undergo to determine if they qualify for a loan — should be automated, the report said.
