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CSFI Develops Compass Guide to Small-dollar Credit
Friday, February 28, 2014 6:55 AM

According to the Center for Financial Services Innovation (CFSI), millions of people use small-dollar credit products every year. CFSI's 2012 Financially Underserved Market Size Study, finds that subprime consumers spent an estimated $41.2 billion on small-dollar credit in 2012. Access to high-quality small-dollar credit, CFSI says, is a key component of a successful financial life for many Americans.

Over the last six months, CFSI convened nearly 50 lenders, alternative data providers, consumer advocates, nonprofits and academics to create a Compass Guide to Small-Dollar Credit. The 17-page guide defines the key characteristics of high-quality loans of less than $5,000, providing a roadmap for lenders to develop products that meet consumers' needs responsibly and profitably.

The guide provides detailed advice and examples organized around the life cycle of a loan, from marketing and underwriting to consumer communications and collections. Three key themes emerge:

  • It's not just about price
  • Ability to repay is paramount
  • The solution is not one-size-fits-all

The Compass Guide to Small-Dollar Credit is available on CFSI’s website.