Until 2013, a small number of banking institutions had been siphoning vast amounts yearly from client records through “direct deposit advance” — items that carried typical annualized interest levels of as much as 300%. Like storefront payday advances, deposit advance had been marketed as an intermittent bridge to a consumer’s next payday. But additionally like storefront pay day loans, these bank items caught borrowers in long-term, debilitating financial obligation.
But banks destroyed desire for deposit advance as a result of 2013 regulatory guidance instructing finance institutions to evaluate borrowers’ ability to settle their loans predicated on earnings and expenses.
The American Bankers Association called on the Federal Deposit Insurance Corp. And Office of the Comptroller of the Currency to back off their 2013 guidance, the FDIC to withdraw different guidance dealing with overdraft protection and the Consumer Financial Protection Bureau to withdraw its proposed rule on small-dollar lending in a recent policy document.