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FDIC Selects Anti-Payday Initiative as One to Watch

The Federal Deposit Insurance Corporation has chosen the Worker's Loan Program - a cutting edge initiative launched by Wilmington Trust Company and West End Neighborhood House of Wilmington, DE and backed by resources from FHLBank - as one of 30 small dollar lending programs whose features may prove replicable across the country.

Instituted last fall, the Worker's Loan Program offers an alternative to the high-cost practice known as payday lending by providing borrowers with small, short-term loans at low interest rates, financial education and referrals to support services. By contrast, much-criticized payday lending provides short-term financing, often at exorbitant interest rates and with automatic rollovers that can perpetuate indebtedness. Such indebtedness may last for months or years, sometimes making it nearly impossible for borrowers to achieve solid financial footing and become a first-time homeowner.

The maximum loan available from the Worker's Loan Program is $500. Qualified applicants receive Wilmington Trust's regular personal loan rate. Loans can be paid in a lump sum or a payment plan may be established, whichever fits the applicant's financial ability. West End administers this program and serves as the contact point for individuals and families who may want to apply for a loan.

Funding, support and commitment are being provided by AIG, Citi Foundation, Speer Trust and United Way of Delaware. FHLBank Pittsburgh has put forth funds to assist in marketing and administration.

"This program is a terrific example of a multi-partner initiative working to improve the lives of people in our communities," said Barbara Reed, director of housing and financial management at West End.

The 30 initiatives chosen by FDIC as part of its two-year small dollar loan pilot program make loans of $1,000 or less. At the conclusion of its pilot, FDIC will examine program features and results and develop "best practices" that can be used by other mainstream financial institutions.