Short-term loans without the shark

TEXT OF STORY

Scott Jagow: You see them all over the place, especially in low-income neighborhoods. Those payday loan stores. They’ll give people quick cash, but charge them out the wazoo for it. With the subprime lending mess only getting worse, the government’s looking for alternatives to those places. Alisa Roth reports.

Alisa Roth: A pilot project from the Federal Deposit Insurance Corporation, or FDIC, will try to find ways that banks can provide low dollar value, short-term loans.

The agency will look at banks that offer things such as loans of less than $1,000, mandatory savings programs and reasonable interest rates.

Jennifer Thomson is with the Lower East Side People’s Federal Credit Union. The New York financial institution already offers short-term, low-value loans to its customers. Thomson says they’re not a money-maker for the credit union, but there’s no reason why they couldn’t be.

Jennifer Thomson: Banks could set a pricing structure so that it would be profitable for them, beneficial for the customer and then leading them up what we call the credit path.

That means that customers who initially come in looking for short-term loans could eventually become clients for other banking products.

At the end of the study, the FDIC will make its findings available to other institutions to use as a resource.

In New York, I’m Alisa Roth for Marketplace.