April 25, 2013
Office of the Comptroller of the Currency Releases Guidance on Deposit Advance Products
WASHINGTON—The Office of the Comptroller of the Currency today proposed guidance related to deposit advance products.
The agency today submitted the proposed guidance to the Federal Register for publication next week, with a 30-day comment period.
“We have significant concerns regarding the misuse of deposit advance products,” said Comptroller of the Currency Thomas J. Curry. “The guidance today is an important step toward better protecting consumers and enhancing the safety and soundness of national banks and federal savings associations that may be offering similar products.”
Deposit advance products are small-dollar, short-term loans that a bank will make available to a customer who has recurring direct deposits with that bank. The deposit advance loan is to be repaid from the proceeds of the customer’s next direct deposit. These loans typically have high fees, are repaid in a lump sum in advance of the customer’s other bills, and often fail to consider the customer’s ability to repay the loan while still meeting other financial obligations.
The OCC encourages national banks and federal savings associations to respond to customers’ short-term credit needs. However, deposit advance products can pose a variety of safety and soundness, compliance, consumer protection, and other risks. The guidance addresses how any bank offering the products may do so in a safe and sound manner without increasing its credit, compliance, legal, and reputation risks.
The OCC will closely review the activities of banks that offer or propose to offer deposit advance products, through direct examination of the bank, examination of any third party participating in such transactions under an arrangement with the bank, and, where applicable, review of any licensing proposals involving this activity. These examinations will focus not only on safety and soundness risks, but also on compliance with applicable consumer protection laws.
The OCC is also withdrawing its proposed guidance on Deposit-Related Consumer Credit Products published on June 8, 2011.