Developing High-Quality Small-Dollar Credit Products
Every year, an increasing number of Americans are turning to alternative credit sources for quick access to cash. An estimated 15 million people annually use small-dollar credit (SDC) products to meet their financial needs. And tens of millions more rely on subprime credit cards, checking account overdrafts and other expensive forms of credit when their access to traditional credit is limited. SDC products, sometimes called microloans, refer to payday, pawn, deposit advance, auto title, and installment loans, typically under $5,000.
Reliable access to small loans is vital to the financial success of millions of U.S. consumers, yet many SDC products carry terms that put borrowers at risk of becoming trapped in cycles of mounting debt. We recognize a critical need to develop high-quality financial services innovations that can help meet this demand for short-term liquidity while reducing the risks posed by many small-dollar credit products.
CFSI has undertaken extensive consumer research to examine the needs, decisions, and experiences of SDC consumers. Additionally, in consultation with a wide variety of industry stakeholders and consumer advocates, we have used our Compass Principles framework
to develop a set of guidelines
to define what a high-quality small-dollar credit product looks like.
The Compass Guide to Small-Dollar Credit
serves as a tool to define quality for the small-dollar credit industry.
A Complex Portrait: An Examination of Small-Dollar Credit Consumers
shows why consumers use these products, how they choose among them, how they fare afterwards, and what they think about their experiences.
Know Your Borrower: The Four Need Cases of Small-Dollar Credit Consumers
explores the financial needs that drive borrowers’ demand for credit.
Design Matters: Learning from Consumers’ Experiences with Small-Dollar Loans
provides product design recommendations based on qualitative and quantitative research with SDC consumers.
New Research Highlights Consumer Preferences for Key Product Features
announces the creation of the Small-Dollar Credit Test & Learn Working Group, made up of providers who are testing new high-quality small-dollar credit innovations.
2012 Financially Underserved Market Size Study
reveals a market that is significant and ripe for credit product innovations.
CFSI’s Small Dollar Credit Infographic
illustrates why consumers turn to small-dollar credit.
A Playbook for Small-Dollar Credit
looks at the future of small-dollar credit.