Federal Deposit Insurance Corporation (FDIC) staff, on March 28, outlined a proposal before the FDIC Advisory Committee on Economic Inclusion to create a two-year pilot project for banks. The committee endorsed the project to highlight the need for reasonably priced, small-dollar loan programs that provide value to consumers and banks.

"The FDIC, and its Chairman, Sheila Bair, should be proud of recent efforts that encourage banks to reach out and serve the growing ranks of the unbanked and underserved population in our country," said Diana L. Taylor, Chairman of the FDIC Advisory Committee on Economic Inclusion. "The committee strongly endorses this innovative pilot project and looks forward to assisting the FDIC and its Board of Directors in reviewing and implementing this program."

Some of the key features of the pilot project could include: loan amounts of up to $1,000; mandatory savings components; payment periods that extend beyond a single pay period; interest rates below 36 percent; low or no origination fees; no prepayment penalties; prompt loan application processing; and access to financial education to help with asset building. As an incentive, participating institutions could receive favorable consideration under the Community Reinvestment Act or be selected to serve as depositories for FDIC funds.

More details of the pilot project will be made available if the FDIC Board decides to consider the program. There is no timetable as to when the Board may act, but if it does, the proposal will be issued for comment before it becomes effective.