Provides details on the ESSDL program, guidance on compliance issues, ways to measure success, and supplemental documents, including a sample memorandum of understanding between a credit union and an employer.
Employer-Sponsored Small-Dollar Loan
Collaborate with employers in your community to provide safe, affordable loans that help hardworking employees avoid predatory rates and fees, establish or repair credit and begin to save. Download free, research-based resources and get started today or keep reading to learn more.
Employer-Sponsored Small-Dollar Loan Details
Research shows that more than half of American households have at least some difficulty keeping up with monthly expenses, and over a quarter of all households have turned to high cost alternative borrowing methods (such as an auto title loan or a payday loan) to help them make ends meet in the last five years. Research also shows that financial stress has a negative impact on employee engagement, absenteeism, and productivity―ultimately affecting employer profitability.
Through the Employer-Sponsored Small-Dollar Loan (ESSDL) program, financial institutions are successfully collaborating with employers across the country to provide safe and affordable small-dollar loans to help hardworking employees meet their immediate needs and build a stronger financial foundation.
What does this mean for my financial institution?
During an 18-month test period, the ESSDL program was implemented in eight states by 13 financial institutions that worked with 48 employers and showed that:
- Implementing the program is easy. Offering the ESSDL program requires little staff training and minimal changes to financial institution operating systems.
- Competition is minimal and often predatory. The small-dollar lending market is dominated by high-cost alternative lenders and underserved by traditional lenders.
- The loan program is financially feasible. With reported loss rates ranging from 2 to 3% during the first two phases of product testing, the ESSDL outperformed projections.
- The program provides a way to deepen roots in your community. While employers may offer the ESSDL as a stand-alone employee benefit, partnerships with nonprofit community organizations that provide employees with additional services (including referrals to community resources and financial education workshops) may enhance program uptake and implementation.
Learn more and get started today by downloading the materials at the bottom of the page.
This program is offered in collaboration with the FINRA Investor Education Foundation. The FINRA Foundation provides underserved Americans with the knowledge, skills and tools to make sound financial decisions throughout life. To learn about other FINRA Foundation initiatives, visit finrafoundation.org.
"Participating in the ESSDL program has been a very positive experience for both our credit union and our members. With guidance from the research conducted through Filene’s incubator program, we have broadened our underwriting procedures in order to approve more and better loans to meet our members’ emergent needs. The ESSDL is a highly valued, low-cost employee benefit that has given us an opportunity to further strengthen an already strong partnership with our sponsoring health system. This has truly been a “win-win-win” endeavor."
Mercy Health Partners Federal Credit Union
OCC Bulletin 2018-14, "Core Lending Principles for Short-Term, Small-Dollar Installment Lending"