For decades, federal regulators and policy makers have grappled with how to foster credit inclusion to the financially underserved. Many programs were developed with little success. The Federal Deposit Insurance Corporation launched a now-defunct small dollar loan program in 2008 with marginal results. A few years later, the National Credit Union Administration began allowing credit unions to offer Payday Alternative Loans (PAL) in 2010. After nearly a decade however, PALs serve an anemic 0.2 percent of the $90 billion short-term, small-dollar market. With 38 million Americans having a non-prime FICO score below 600, none benefit from the now-defunct FDIC program, and only a fraction of them benefit from the PAL program. Fintech firms, and all the disruptive innovation they bring with them, provide a chance at financial inclusion for these non-prime consumers.
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