The Community Loan Center (CLC) Small Dollar Loan Program was created to offer workers an affordable alternative to high-cost credit. Developed by the nonprofit come dream. come build. and its community development financial institution partner in the Rio Grande Valley of Texas, the program provides employer-sponsored loans of up to $1,000 with effective annual percentage rates below 22 percent (much lower than a typical payday loan). Payments are made by automatic payroll deductions to reduce risk for lenders and improve access for borrowers. Since launching in 2011, CLC has developed into a franchise model, issuing more than 117,000 loans to more than 35,000 borrowers across multiple states.

Why This Matters

The CLC Small Dollar Loan Program offers important insights for employers, lenders, and policymakers seeking to expand access to affordable credit. The approach differs from traditional small-dollar lending by (1) delivering loans as an employer-sponsored benefit with no credit requirements, reducing barriers to uptake, (2) structuring repayment through automatic payroll deductions, which lowers risk for lenders and simplifies repayment for borrowers, and (3) offering more affordable terms than payday loans. The program demonstrates that it is possible to meet borrowers’ short-term financial needs with a sustainable, lower-risk loan model that benefits both employees and employers.

What We Found

Over the past decade, the CLC Small Dollar Loan Program has provided a compelling model for expanding credit access for borrowers who lack savings or traditional credit and reduce dependence on high-cost loans. Key findings include the following:

• The program is an attractive option for borrowers. Borrowers frequently cited the program’s ease of use, lack of credit score requirement, and automatic payments through payroll deductions as attractive qualities that made the program stand out against alternatives.
• Repeated use highlights an ongoing need for credit. The average borrower used the program three times (median of two) over the study period.
• Loans are less risky than payday alternatives. By running the program as an employer-based benefit and setting up payments as automatic paycheck deductions, lenders can reduce their risk by taking on borrowers who have low credit scores but steady employment.
• Employers see value in offering the program. Most employers found the program straightforward to implement and viewed it as a useful benefit to offer employees. But program administrators have faced challenges expanding the participating employer and lender base.

How We Did It

We conducted interviews and analyzed program and credit report data. 

• We interviewed several program administrators, franchises, employers, and employees affiliated with and participating in the program. We asked questions to understand program implementation, program needs, uptake, and usage patterns.
• Program and credit report data analysis. We analyzed deidentified program and credit data, provided by CLC and a large credit reporting firm, respectively. Program data included information about 35,411 borrowers, their loan amounts, and economic and demographic details; credit data included credit attributes for these borrowers.