This guidance provides information about payday lending, a particular type of subprime lending, and supplements and clarifies previously issued guidance about such programs, including the July 2003 Guidelines for Payday Lending. It describes safety and soundness and compliance considerations for examining and supervising state nonmember institutions that have payday lending programs.This guidance is necessitated by the high risk nature of payday lending and the substantial growth of this product. It describes the FDIC’s expectations for prudent risk-management practices for payday lending activities, particularly with regard to concentrations, capital, allowance for loan and lease losses, classifications, and protection of consumers. The guidelines also address recovery practices, income recognition, and managing risks associated with third-party relationships.

When examiners determine that management of safety and soundness or compliance risks is deficient, they should criticize management and initiate corrective action. Such actions may include formal or informal enforcement action. When serious deficiencies exist, enforcement actions may instruct institutions to discontinue payday lending.