A RESOLUTION PROMOTING SAFE AND AFFORDABLE LENDING PRACTICES
WHEREAS, the National Black Caucus of State Legislators (NBCSL) has always been committed to financial empowerment through improved access to capital as well as a marketplace that offers safe and affordable lending products and services;
WHEREAS, in 1998, the United Nations defined poverty as the lack of access to certain essential goods and services, including access to credit;
WHEREAS, the need for small-dollar closed end credit exists in every community throughout the country;
WHEREAS, not all loan types are equally safe and affordable, and the structure of certain loans
significantly increases the likelihood of borrowers falling into a cycle of debt;
WHEREAS, responsibly structured credit is essential to support a household’s ability to save, build a sound credit history, and facilitate crucial investments that can provide a foundation for other
wealth-building activities;
WHEREAS, the key structural qualities of closed end loans that are safe and affordable are that the lender makes a good faith effort to assess the borrower’s ability to repay the loan and that the loan is repayable in substantially equal installments, with no balloon payments;
WHEREAS, it is the intention of this body to ensure access to loans that are low cost rather than low rate, since consumers buy goods with dollars and cents and not with annual percentage rates;
WHEREAS, NBCSL passed Resolution BFI-13-14, “PROMOTING SAFE AND AFFORDABLE LENDING PRACTICES,” among the 2013 Ratified Resolutions and that resolution promotes adequate safeguards to protect the general community from abusive financial services;
WHEREAS, this resolution maintains that responsibly structured credit is an essential part of the wealth-building ecosystem, that includes building a sound credit history, as well as saving and wise investment;
WHEREAS, all small-dollar closed end credit should be “fully amortized,” meaning that the Total of Payments defined under the Federal Truth in Lending Act, is repaid in substantially equal multiple installments at fixed intervals to fulfill the consumer’s obligation;
WHEREAS, small-dollar closed end credit, when used prudently by consumers, may help establish, re-establish or improve credit scores;
WHEREAS, all small-dollar closed end credit should be reported to at least one of the three major credit agencies: Equifax, Experian and TransUnion;
WHEREAS, all small-dollar closed end credit should provide that the Total of Payments as defined in the Truth in Lending Act be repaid over at least a 120 day period in substantially equal payments; and
WHEREAS, Traditional Installment Loan Lenders offering amortizing small-dollar closed end credit, may prevent cycle of debt issues inherent with non-amortizing balloon payment loans.
THEREFORE, BE IT RESOLVED, that the NBCSL supports small-dollar closed end credit in the form of traditional installment loans;
BE IT FURTHER RESOLVED, that Traditional Installment Loan Lenders should be reasonably
protected;
BE IT FURTHER RESOLVED, that the NBCSL supports the expansion of Traditional Installment Loans as an affordable means for borrowers to establish and secure small dollar closed end credit while preventing cycle of debt issues inherent with non-amortizing balloon payment loans; and
BE IT FINALLY RESOLVED, that a copy of this resolution be transmitted to the President of the United States, Vice President of the United States, members of the United States House of
Representatives and the United States Senate, and other federal and state government officials as appropriate.
- SPONSOR: Representative Karla May (MO)
- Committee of Jurisdiction: Business and Economic Development Policy Committee
- Certified by Committee Co-Chairs: Senator Jeffery Hayden (MN) and Representative Angela Williams (CO)
- Ratified in Plenary Session: Ratification Date is December 4, 2015
- Ratification is certified by: Senator Catherine Pugh (MD), President