The withdrawal of guidance about “deposit advance products” (DAP) to national banks – possibly opening options for banks to offer payday and other short-term loans — is set to be published in the Federal Register Thursday; the effective date was Oct. 5.
Last week, the Office of the Comptroller of the Currency (OCC) announced it was rescinding the guidance (known as “Guidance on Supervisory Concerns and Expectations Regarding Deposit Advance Products” and OCC Bulletin 2013-40) the same day that the new payday lending rule was issued by the Consumer Financial Protection Bureau (CFPB). The bureau’s rule effectively bans the short-term loans in most circumstances.
When Acting Comptroller Keith Noreika announced the withdrawal (or “rescission”) of the guidance, he noted that the CFPB’s final rule “necessitates revisiting the OCC guidance.” He also said the OCC may consider issuing new guidance in the future.
The continuation of the OCC’s guidance, Noreika added, would subject national banks and federal savings associations to “potentially inconsistent regulatory direction” and “undue burden as they prepare to implement the requirements of the CFPB’s final rule.”
The national bank regulator issued the guidance four years ago to oversee payday and short-term loans at banks. The loans (known as “DAP loans”) have been defined by the comptroller as small-dollar, short-term loans or lines of credit that a bank makes available to a customer whose deposit account reflects recurring direct deposits. Under that definition, a customer obtains a loan, which is to be repaid from the proceeds of the next direct deposit.
In last week’s announcement, Noreika asserted that the 2013 guidance may hurt the consumers it is intended to help: “the most marginalized, unbanked and underbanked portions of our society.”
“Moreover, in the years since the agency issued the guidance, it has become clear to me that it has become difficult for banks to serve consumers’ need for short-term, small-dollar credit,” Noreika wrote. “As a result, consumers who would rely on highly regulated banks and thrifts for these legitimate and well-regulated products to meet their financial needs turn to other, lesser regulated entities, which may result in consumer harm and expense.”