FDIC and OCC Finalize Crackdown on Bank Payday Lending


Center for Responsible Lending
November 21, 2013

Good news for banking customers: Today the Federal Deposit Insurance Corporation (FDIC) and the Office of the Comptroller of the Currency (OCC) finalized guidance that effectively directs the banks they supervise to end abusive practices inherent in payday lending. This is a key step in recognizing the predatory nature of loans with triple-digit interest rates. The guidance also affirms the importance of requiring lenders to assess a borrower’s ability to repay loans and establishes a clear limit on repeat loans.

Although this guidance applies only to banks supervised by the FDIC and OCC, we expect and hope that all banks will accept this as a clear warning to stop pushing payday loans, including banks supervised by the Federal Reserve. We also expect that banks will view this guidance as a new opportunity to develop more responsible small dollar loan products that will be mutually beneficial to the banks and their customers.

This guidance addresses longstanding concerns about the harms of payday loans.  The banking regulators have acted after hearing opposition to bank payday lending from more than 157,000 citizens, 250 organizations, a number of civil rights leaders and faith leaders, city and state elected officials, and members of the U.S. Congress. In addition, several institutional investors have raised concerns about payday lending and its impact on consumers and banks.

The new guidance comes on the heels of yesterday’s action by the Consumer Financial Protection Bureau, exposing numerous illegal activities by one of the nation’s largest payday lenders, Cash America.  All objective evidence — financial research, enforcement actions and millions of debt-burdened Americans— reveal payday loans to be a defective product that typically traps borrowers in debt.  

We applaud the FDIC and OCC for recognizing the harms caused by this type of lending and sending a clear message to the banks they supervise.  We urge the Federal Reserve to do the same with regard to Fifth Third Bank and Regions Bank, as both of these banks continue to push payday products.  And we hope the CFPB will continue its work on payday lending by promulgating a rule that stops any payday lender from trapping borrowers in debt.

For more information, contact Ellen Schloemer at 919-539-9092 or ellen.schloemer@responsiblelending.org

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About the Center for Responsible Lending

The Center for Responsible Lending is a nonprofit, nonpartisan research and policy organization dedicated to protecting homeownership and family wealth by working to eliminate abusive financial practices. CRL is affiliated with Self-Help, one of the nation's largest community development financial institutions.