|November 29, 2013|
Previously published on November 27, 2013
On November 21st, the Office of the Comptroller of Currency (OCC) and the Federal Deposit Insurance Corporation (FDIC) separately issued guidance on deposit advance loans.4 The guidance establishes numerous expectations for institutions that offer such products. It covers matters such as consumer eligibility, capital adequacy, fees, compliance, management oversight, and third-party relationships. Under the guidance, the OCC and FDIC expect regulated institutions to only offer the products to customer who (i) have at least a six month relationship with the bank; (ii) do not have any delinquent or adversely classified credits; and (iii) meet specific ability-to-repay standards. Among other restrictions, the guidance also provides that each loan should be repaid in full before the extension of a subsequent loan. It also provides for a “cooling-off period” before advancing another loan.
The OCC and FDIC’s final guidance is substantially the same as the proposed guidance issued by the agencies in April. One clarification is that the eligibility and underwriting expectations do not require the use of credit reports. The Federal Reserve Board did not issue guidance, but instead made a policy statement.
Despite these restrictions, the FDIC still encouraged institutions to continue to offer the “properly structured products,” acknowledging that demand for these types of products exists.