Credit Deserts Report

A Special MAF Report 

In the wake of the recent recession, a growing debt crisis is facing low-income families. Supported by promising results from a pilot research project, this report calls for better consumer disclosure on small dollar loans. Mission Asset Fund’s Financial Facts label is a first step toward protecting individuals from a cycle of poverty and high-cost debt.

Without a credit history, a person is invisible to the mainstream U.S. financial system. As “unattractive” borrowers, low-income consumers turn to alternative lenders, often settling for loans with high costs and predatory terms. This report presents MAF's Financial Facts label as a model for communicating loan terms in a clear, transparent, and recognizable format.

Modeled on the Nutritional Facts label, the Financial Facts label makes loan features clear: total amount, number and amount of monthly payments and fees, annual percentage rate, late payments, and total cost. Just as the Nutritional Facts label offers a standardized framework for consumers to evaluate food content according to the percentage of daily recommended calorie intake, the Financial Facts label uses a percentage of monthly debt budget to help consumers assess loan affordability.

MAF tested the label to investigate its effectiveness, the results of which are presented below.

The Results