In a recent interview, Comptroller of the Currency Joseph Otting, announced the OCC’s plan to “clarify” its support of bank-offered deposit advance products. “Deposit advance products” are typically defined as small-dollar, short-term loans or lines of credit that are to be repaid from the proceeds of the consumer’s next direct deposit. The WSJ reports that the OCC’s planned announcement will focus on 45-to-90 day loans.
In 2013, the OCC issued its Guidance on Supervisory Concerns and Expectations Regarding Deposit Advance Products, OCC Bulletin 2013-40 (the “DAP Guidance”). The DAP Guidance had the impact of effectively prohibiting national banks from offering such products and driving consumers seeking emergency loans and access to short-term credit to pay day lenders, credit card companies and newly established FinTech companies. However, in October 2017, Keith A. Noreika, then Acting Comptroller of the OCC, approved the rescission of the Obama-era DAP Guidance citing the Consumer Financial Protection Bureau’s proposed Pay Day Lending rule. Many in the industry believe the OCC recession of the DAP Guidance was simply the first step in allowing national banks to actively participate in the offering of deposit advance products. It appears that the banking industry will have a definitive answer as to whether it may offer these products within the next few months.
In a market where high rates and certain practices are often criticized as being wholly unfair, predatory and lacking adequate regulatory oversight, the banking industry, as one of the most highly regulated industries in the U.S., may serve as the most efficient platform by which regulators can control abusive practices.
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