Death of the Deposit-Advance Loan
February 24, 2014 7:30 AM
It doesn't take much for regulators to kill a product. Last April, Consumer Financial Protection Bureau Director Richard Cordray compared banks' deposit-advance loans to payday loans . The Office of the Comptroller of the Currency and Federal Deposit Insurance Corp. followed by issuing stricter guidelines . Since then every bank that offered the product has dropped it. Following is a timeline of the deposit-advance loan's demise.
Image: Bloomberg News
ABA Issues Warning
Shortly after the moves last April by the CFPB and other federal agencies involving deposit-advance loans, American Bankers Association counsel Nessa Feddis warns that the result would be "Either costs go up or the product gets eliminated ."
Animated View of Risk
The Pew Charitable Trusts releases an animated video in June 2013 about a fictional borrower who takes out a payday loan and is unable to repay it. Pew compares payday loans to deposit-advance loans.
Image: illustration from Pew Charitable Trusts' video
Congress Jumps on Board
Lawmakers call for stricter rules on payday loans and deposit-advance products . Last July, one month after Pew releases its video, Sen. Bill Nelson (R-Fla.) says the laws should include "adequate consumer protections and safeguards against predatory lending."
Image: Bloomberg News
Grassroots Protest
Community groups organized by National People's Action launch a protest in November against Regions Financial's deposit-advance loans. "We demand that Regions CEO Grayson Hall pull them off the market," a protestor said.
Image: Thinkstock
Rules Finalized
In late November, the OCC and FDIC finalize restrictions on deposit-advance loans . They require banks to enhance their processes for assessing borrowers' abilities to repay.
Image: Bloomberg News
Wells Fargo Studies the Issue
In January, Wells Fargo (WFC), one of six banks known to offer to deposit-advance loans, says it plans to make a decision about whether to continue offering the product. Chief Financial Officer Tim Sloan says the bank will make a decision "next few weeks
or next few months."
Image: Bloomberg News
Regions Drops Out
A day after Wells' statement, Regions says it will discontinue its deposit-advance loan business . The company vows to develop other short-term consumer loans.
Headed for the Exit
Following Regions' lead, Wells, U.S. Bancorp (USB), Fifth Third (FITB) and Guaranty Financial drop their deposit-advance loan products .
Image: Thinkstock
Last Shoe Drops
BOK Financial in Tulsa, Okla., the last known bank to offer deposit-advance loans, quits the business in late January . "We
understand the difficult situation many of our clients may be in as a result of its discontinuation," a BOK executive said at the time.
Image: Thinkstock
