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Wells, U.S. Bancorp to stop making contentious short-term loans [January 18, 2014] By Peter Rudegeair (Reuters) — Wells Fargo & Co <WFC.N> and U.S. Bancorp <USB.N> said on Friday that they would stop offering customers a type of small, short-term loan that has come under regulatory scrutiny. |
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The so-called deposit advance products are
similar to payday loans, in that they are both small, short-term
loans and have been criticized by consumer activists for their
high fees. These loans are automatically repaid out of future
direct deposits into checking accounts. A typical deposit
advance loan can carry fees of $1.50 to $2 for every $20
borrowed. In November, the Office of the Comptroller of the Currency,
which regulates national banks, and the Federal Deposit
Insurance Corp said they would make rules for deposit advance
products more stringent. The regulators said they planned to
impose additional limits such as requiring a one-month
cooling-off period between the time one loan is repaid and
another can be extended. Wells Fargo, the fourth largest U.S. bank, said it will no
longer make its direct deposit advance product available for
customers who open accounts after February 1, though existing
customers can use the product until the middle of 2014. U.S. Bancorp, a Minneapolis, Minnesota-based bank with $361
billion in assets, will cease offering its checking account
advance product to new customers on January 31 and existing
customers on May 30. Both banks said the decision to stop providing deposit advance
loans was in response to the OCC and FDIC's guidance. They did
not disclose the revenue they get from the product, but it is a
small part of their overall business. Regions Financial Corp <RF.N>, a Birmingham, Alabama-based bank
with $117 billion in assets, said on Wednesday that it would end
its Ready Advance product by the end of the year. (Editing by Stephen Powell) [© 2014 Thomson Reuters. All rights reserved.] Copyright 2014 Reuters. All rights reserved. This material may not be published,
broadcast, rewritten or redistributed.
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