Moving Forward: How Should We Serve the Short-Term Credit Needs of Low-Income Consumers?

MF10-2: Almost one-third of the 30 million U.S. households who are unbanked or underbanked borrow to pay for small-dollar, short-term needs. They obtain loans through payday lenders, rent-to-own centers, pawn shops, refund anticipation lenders, or any of a variety of other non-mortgage–related sources, including friends and family. These individuals either conduct their financial lives entirely outside of traditional banks and credit unions (unbanked) or maintain a checking or savings account while also using alternative providers (underbanked). Lower income and certain minority groups are disproportionately represented among unbanked and underbanked households...