In a comment letter to the FDIC today, the American Bankers Association reiterated its call for the agency to rescind its 2013 guidance on direct deposit advance services. The letter came in response to a request for information on how the FDIC can encourage banks to offer small dollar credit products that are economically sustainable while meeting the needs of bank customers.
The 2013 guidance established prescriptive supervisory expectations for underwriting, credit risk monitoring and limits on customer usage that caused almost all banks to discontinue those services, ABA noted, adding that it “stands as a significant barrier for banks that seek to establish or expand a single-payment credit program, a product that meets many consumers’ needs for short-term sources of funds.”
As the FDIC reconsiders its approach to small-dollar products, ABA also urged it to create a regulatory framework that permits banks to use automated, efficient underwriting and to reject a regulatory approach that imposes prescriptive underwriting standards, relies on use of an APR to assess the affordability of short-term small dollar credit or imposes arbitrary limitations on reborrowing.