Dodd Frank Act - Title XII: Improving Access to Mainstream Financial Institutions

The purpose of this title is to encourage initiatives for financial products and services that are appropriate and accessible for millions of Americans who are not fully incorporated into the financial mainstream.

Expanded Access to Mainstream Financial Institutions

The Secretary is authorized to establish a multiyear program of grants, cooperative agreements, financial agency agreements, and similar contracts or undertakings to promote initiatives designed:

• to enable low- and moderate-income individuals to establish one or more accounts in a federally insured depository institution that are appropriate to meet the financial needs of such individuals
• to improve access to the provision of accounts, on reasonable terms, for low- and moderate-income individuals.

Program Activities

Subject to regulations prescribed by the Secretary, an eligible entity may, in participating in

a program, offer or provide to low- and moderate-income individuals products and services relating to accounts, including,

• small-dollar value loans; and
• financial education and counseling relating to conducting transactions in and managing accounts.

Low-cost Alternatives to Small Dollar Loans

The Secretary is authorized to establish multiyear demonstration programs by means of grants, cooperative agreements, financial agency agreements, and similar contracts or undertakings, with eligible entities to provide low-cost, small loans to consumers that will provide alternatives to more costly small dollar loans.

Loans under this section shall be made on terms and conditions, and pursuant to lending practices, that are reasonable for consumers.

Financial Literacy and Education Opportunities

Each eligible entity awarded a grant under this section shall promote and take appropriate steps to ensure the provision of financial literacy and education opportunities, such as relevant counseling services, educational courses, or wealth building programs, to each consumer provided with a loan pursuant to this section.

Authority to Expand Access

As part of the grants, agreements, and undertakings established under this section, the Secretary may implement reasonable measures or programs designed to expand access to financial literacy and education opportunities, including relevant counseling services, educational courses, or wealth building programs to be provided to individuals who obtain loans from eligible entities under this section.

Grants to Establish Loan-loss Reserve Funds

The purposes of this section are:

• to make financial assistance available from the Fund in order to help community development financial institutions defray the costs of operating small dollar loan programs, by providing the amounts necessary for such institutions to establish their own loan loss reserve funds to mitigate some of the losses on such small dollar loan programs
• ‘to encourage community development financial institutions to establish and maintain small dollar loan programs that would help give consumers access to mainstream financial institutions and combat high cost small dollar lending.

Loan-loss Reserve Fund Grants

The Fund will make grants to community development financial institutions or to any partnership between such community development financial institutions and any other federally insured depository institution with a primary mission to serve targeted investment

Areas to establish a loan-loss reserve fund in order to defray the costs of a small dollar loan program established or maintained by such institution.

Matching Requirement

A community development financial institution or any partnership of institutions established pursuant to paragraph (1) shall provide non-Federal matching funds in an amount equal to 50 percent of the amount of any grant received under this section.

Use of Funds

Any grant amounts received by a community development financial institution or any partnership between or among such institutions ‘ may not be used by such institution to provide direct loans to consumers; It may be used by such institution to help recapture a portion or all of a defaulted loan made under the small dollar loan program of such institution. Further it may be used to designate and utilize a fiscal agent for services normally provided by such an agent.

Technical Assistance Grants

The Fund shall make technical assistance grants to community development financial institutions or any partnership between or among such institutions to support and maintain a small dollar loan program. Any grant amounts received under this paragraph may be used for technology, staff support, and other costs associated with establishing a small dollar loan program.

Procedural Provisions

An eligible entity desiring to participate in a program or obtain a grant under this title shall submit an application to the Secretary, in such form and containing such information as the Secretary may require.

Evaluation and Reports to Congress

For each fiscal year in which a program or project is carried out under this title, the Secretary shall submit a report to the Committee on Banking, Housing, and Urban Affairs of the Senate and the Committee on Financial Services of the House of Representatives containing a description of the activities funded, amounts distributed, and measurable results, as appropriate and available.