FDIC Guidelines

Some may consider payday loan firms as unregulated, this is not the case. Firms are licensed in the states which allow them. They are subject to examination, (which are applicable to them), for compliance with state and federal laws and regulations. FDIC guidelines state that examiners should ensure institutions establish a cooling off period, maximum number of loans, and a limit on loans within a certain time frame.

During the cooling off, or waiting period, one must wait between the time a payday loan is repaid and another application is available before making another loan. One must also establish a maximum number of loans per customer which will be allowed within one calendar year or other designated time period. The lender must see to it that the borrower has no more than one outstanding payday loan with the bank at a time. In devising policy changes, regulators should be cautious that while addressing the perceived risks to payday loan borrowers and the institutions providing those loans. It is possible to increase borrowers' risks by restricting the availability of that type of credit.