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ABA urges FDIC, OCC not to adopt deposit advance rule

ABA yesterday urged the FDIC and Office of the Comptroller of the Currency not to adopt their proposed guidance on deposit advances. In a comment letter, ABA said that the guidance would harm customers with limited access to credit and drive them into riskier financial products, as well as creating regulatory confusion.

“The purpose of the proposed guidance appears to be elimination rather than improvement of the product,” ABA wrote. “The net effect will be hardship for users of the product” -- including the use of costlier and less consumer-friendly payday loans or the “sometimes harsh consequences of lack of funds.” The guidance would also “chill innovation,” ABA said, as its “onerous nature” sends a message that all kinds of deposit advance products should be avoided.

ABA also argued that consumer financial products are the jurisdiction of the Consumer Financial Protection Bureau, which is currently studying deposit advances. The agencies' guidance, ABA said, will lead to a “patchwork of overlapping regulations and an unlevel playing field.”

The proposed guidance includes requirements to use the same underwriting criteria used for other loans, in addition to analyzing customer checking account activity. Customers are also limited to six advances per year, and they may take no more than one advance a month. Click here to read the letter.

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