On November 21, 2013, the FDIC issued its Final Guidance on Supervisory Concerns and Expectations Regarding Deposit Advance Products (the “Final Guidance”). The Final Guidance supplements the FDIC’s existing guidelines on payday loans and subprime lending and the FDIC’s guidelines on small dollars loans.
The Final Guidance provisions:
- Suggest review of the recurring deposits and withdrawals over at least a six-month period of the account from which the customer’s deposit advance would be repaid, to determine whether the customer has the ability to repay the loan without needing to borrow repeatedly from any source.
- Include no expectation that a bank will do any additional analysis of deposits and withdrawals outside of the account being used to repay the deposit advance product.
- Provide no expectation that a bank will obtain a credit report to determine whether a customer is eligible for its product.
- Are applicable to all deposit advance products, regardless of how the extension of credit is structured (i.e., applicable to all deposit advance products including lines of credit, not just loans).
- Are not preemptive of state usury laws, where applicable.
- Do not distinguish between inflows in an account; thus, banks can consider inflows from government benefits checks in the same way they would view inflows from a customer’s paycheck, etc.
- Allow for repeat usage controls such as “cooling off” periods, during which a customer cannot take out a deposit advance. Banks can use these and other measures to reduce the likelihood that a customer will take out a loan that he or she cannot repay.