The FDIC has requested comments on a proposed supervisory guidance to FDIC-supervised financial institutions that offer or may consider offering deposit advance products. The proposal is intended to ensure that banks are aware of a variety of safety and soundness, compliance, and consumer protection risks posed by deposit advance loans.
Deposit advance loans are a type of small-dollar, short-term credit product that some depository institutions offer to customers maintaining a deposit account, reloadable prepaid card, or similar deposit-related vehicle. The customer takes out a loan, which is to be repaid from the proceeds of their next direct deposit.
The FDIC recognizes the need for safe, affordable and sustainable small-dollar credit products among consumers that are underwritten with consideration of the customer's ability to repay the loan without needing to borrow repeatedly to meet necessary expenses. A number of banks are currently offering such reasonably priced small-dollar loans at reasonable terms to their customers.
The proposed guidance will be published in the Federal Register, with a 30-day comment period.
In addition, the OCC has issued proposed supervisory guidance related to deposit advance products at federal savings associations and national banks. The proposed guidance will be published next week in the Federal Register, with a 30-day comment period.