Wells Fargo, U.S. Bank Face Crossroads on Deposit Advances

November 27, 2013
American Banker  
payday lending news

A handful of banks affected by new federal regulations regarding bank deposit advances -- short-term forms of consumer credit that strongly resemble a payday loan -- confront a tricky decision: either devise a way to offer small-dollar loans that comply with disruptive new rules and still make business sense, or get out of the business altogether.

Four banks, including Wells Fargo and U.S. Bancorp, face this immediate choice, and others will be watching closely to see if they are successful in developing a new formula for small-dollar consumer loans. The regulatory guidance --- finalized recently by the Federal Deposit Insurance Corp. and the Office of the Comptroller of the Currency -- requires banks to evaluate the borrowers' ability to repay without rolling the loan over, and also requires banks to allow at least one statement cycle to elapse before offering another loan.










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