BOK Completes Banks' Exit from Deposit Advance Market

If loan products were the subject of obituaries, this would be the death notice for the bank deposit advance.

The controversial consumer credit product, which strongly resembles a payday loan, has been facing extinction since coming into the crosshairs of federal banking regulators.

Last week, five of the six banks that offered deposit advances — including Wells Fargo (WFC) and U.S. Bancorp (USB) — announced plans to discontinue the product.

Then on Wednesday, the final remaining banking company, BOK Financial (BOKF) of Tulsa, Okla., said that it will end access to its deposit advance service on May 31.

"We continue to believe our product fills a genuine need for clients with little to no access to traditional credit and understand the difficult situation many of our clients may be in as a result of its discontinuation," Pat Piper, executive vice president of consumer banking at BOK Financial, said in an email.

"But we are dedicated to providing products and services that meet our clients' needs and will be working to find another solution for these clients."

Earlier Wednesday, U.S. Bancorp Chief Executive Officer Richard Davis also lamented the deposit advance's demise, during a conference call with analysts.

"I am disappointed that the product has gone because it was probably the most popular customer product I think I have ever had as a banker," Davis said. "It met a need. It was very transparent, it was very clear."

U.S. Bank's version of the product, known as Checking Account Advance, earns the bank approximately $50 million a quarter, Chief Financial Officer Andrew Cecere said during Wednesday's conference call.

The product's demise has been widely anticipated since the Office of the Comptroller of the Currency and the Federal Deposit Insurance Corp. finalized strict new regulatory guidance in November.

"What I am more interested in is trying to find replacement of such products," Davis said Wednesday. "And we are working now with the regulators, primarily the OCC, to see if we can develop some kind of a replacement product."

Consumer advocates, meanwhile, have been cheering the downfall of the deposit advance, which generally features triple-digit annual percentage rates and repayment cycles of no more than 35 days.

"Banks have touted the loans as a quick fix to a financial shortfall, but data have consistently shown that, like other payday loans, the banks' products trap customers in extended cycles of high-cost debt," the Center for Responsible Lending said last week.