The Small Dollar Loan Certainty Act amends federal lending laws to create legal protections for banks and credit unions that offer small loans and lines of credit up to $3,500. Under this "safe harbor," lenders who follow specific requirements cannot be sued by consumers or penalized by federal regulators for violations of Truth in Lending Act rules. To qualify for these protections, lenders must structure installment loans with terms longer than 45 days and prohibit borrowers from rolling over loans into new ones, while lines of credit must have similar repayment requirements with limited exceptions for very small single-payment draws. Lenders must also use sound underwriting practices, cannot charge prepayment penalties or overdraft fees, and must disburse approved loans within five business days. The bill covers banks, credit unions, and third-party servicers that work with these institutions to originate and manage small-dollar credit products.
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