Traditional installment lending is a form of non-bank consumer credit for relatively small sums, which are repaid in equal installments of principal and interest. It is a form of borrowing that has been around for generations.
Loans are generally made from store front locations in the communities they serve. Traditional installment lenders don’t make gray or black market loans – or so-called “payday” or “vehicle title” loans. We are tightly regulated and subject to ongoing, rigorous state examinations.
Our members are compliant with all local, state and federal governmental regulations and standards. Read more here.
Effects of Caps in Other States
In states where overly-aggressive APR limits have been imposed on small dollar loans, the consequences are unequivocal: A rapid and catastrophic reduction in the availability of safe and affordable credit for people who rely on it, and an increased reliance on unsafe or illegal forms of credit, with an allied effect on poverty levels, well-being, and financial mobility.
The impact of interest rate ceilings on households’ credit access
Evidence from a 2013 Chilean legislation: After accounting for both macroeconomic shocks and unobserved household heterogeneity, the results of this study show that being above the interest rate cap reduces the probability of credit access by 8.7% on average. A counterfactual exercise shows that the new legislation excluded 9.7% of the borrowers from banking consumer loans. The law’s impact was strongest on the youngest, least educated and poorest families. Finally, the study shows that the new law affected all lenders of consumer loans in Chile, not just banks.
GET THE FACTS ON HOW SMALL-DOLLAR, NON-BANK LOANS WORK:
Millions of Americans rely on small-dollar, non-bank-supplied credit products: payday, pawn, vehicle title, and personal installment loans from finance companies. Many features of these vital products, however, are not well understood. This book contains explanations of how these loans work, what features they share, and how they differ.
Traditional Installment Lenders Consumers' Bill of Rights
Americans deserve the right to high-quality, consumer finance products. AFSA members live and work in the communities they serve, offering their neighbors financial options that meet their needs.
Read the full Installment Lenders’ Consumer Bill of Rights below.
ABOUT TRADITIONAL INSTALLMENT LENDING:
Traditional installment lending is a form of non-bank consumer credit for relatively small sums, which are repaid in equal installments of principal and interest. It is a form of borrowing that has been around for countless generations. Loans are generally made from store front locations in the communities they serve. Read more below:
THE CFPB TASKFORCE ON CONSUMER FINANCIAL LAW REPORT:
The prime focus of this Taskforce report is the effect of regulation on consumers and their access to credit. The last time such a comprehensive review was undertaken by the federal government was the 1970s. Much has changed for both consumers as well as the consumer credit industry. Our hope is that this report serves as a crucial resource for policymakers in shaping pro-consumer policies that expand consumer access to credit.
Many financial institutions provide a range of optional protection products for their customers’ benefit, including: credit life, disability, and unemployment insurance; debt cancellation agreements; and Guaranteed Asset Protection (GAP). AFSA members provide voluntary protection products only to those customers who choose them, through a process that is subject to rigorous internal procedures and regulatory oversight.
Price Regulation in Credit Markets: A Trade-off between Consumer Protection and Credit Access
Interest rate caps are widespread in consumer credit markets, yet there is limited evidence on its effects on market outcomes and welfare. Conceptually, the effects of interest rate caps are ambiguous and depend on a trade-off between consumer protection from banks’ market power and reductions in credit access. We exploit a policy in Chile that lowered interest rate caps by 20 percentage points to understand its impacts.
RATE CAPS HARM CONSUMERS:
Credit interest rate caps harm consumers, particularly communities of color. Research shows caps on traditional installment credit bar millions of American consumers with sub-prime credit – or no credit – from accessing small dollar loans. These rate caps create a cruel credit crunch that sends desperate consumers to shadowy, non-licensed and non-regulated lenders.