Federal regulators moved this week to crack down on short-term, high-cost bank loans, which critics say are just as harmful to consumers as online and storefront payday loans. Deposit advance products, as they are known, "pose significant safety and soundness and consumer protection risks," according to Comptroller of the Currency Thomas Curry, whose office released new guidance along with the Federal Deposit Insurance Corp.
Data indicates that bank account holders typically borrow a total of $3,000 or more, pay $10 for every $100 borrowed, take out 10 loans a year, and pay $458 in fees on average. Only a handful of major banks offer such products, promoted under such banners as "Early Access" and "Ready Advance," and the OCC and FDIC are not looking to stop them. New restrictions -- such as a "cooling off period" in between advances and a review of prospective borrowers' banking activities to determine their ability to repay -- could, however, greatly change how the banks handle deposit advance products.