Financial Services Bulletin: Action At The CFPB, OCC, FDIC, And Fed

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The OCC and the FDIC Propose Guidance, the Fed Issues a Statement, and the CFPB Publishes a White Paper, on Deposit Advance Loans

On Thursday, April 25, 2013, the Office of the Comptroller of the Currency (the "OCC") and the Federal Deposit Insurance Corporation (the "FDIC") proposed guidance and the Board of Governors of the Federal Reserve System (the "Fed") issued a statement related to deposit advance products.  Deposit advance products are small-dollar, short-term loans that a bank will make available to a customer who has recurring direct deposits with that bank.  The deposit advance loan is repaid from the proceeds of the customer’s next direct deposit.  These loans typically have high fees, are repaid in a lump sum in advance of the customer’s other bills, and often fail to consider the customer’s ability to repay the loan while still meeting other financial obligations.

The proposals and statement follow the release by the Consumer Financial Protection Bureau (the "CFPB") of a white paper titled "Payday Loans and Deposit Advance Products: A White Paper of Initial Data Findings."  The CFPB white paper sets forth the CFPB’s initial data findings regarding the costs and patterns of deposit advance product usage by consumers.  In particular, the CFPB white paper raises concerns about the significant costs associated with sustained repeat usage of deposit advance products.  The CFPB also issued a press release indicating that it expects to engage in related regulatory action later this spring pending further analysis of the short-term, high-cost loan market.

Read the OCC press release

Read the FDIC press release

Read the Fed statement

Read the CFPB press release

Read the CFPB white paper


DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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