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More banks discontinue deposit advances

By Allison Ross ·
Friday, January 17, 2014
Posted: 4 pm ET

Wells Fargo and U.S. Bank announced Friday their intentions to get rid of their deposit advance offerings to comply with guidance from regulators about the controversial short-term loan offerings.

The news comes on the heels of Regions Bank's announcement earlier this week that it, too, is winding down its deposit advance program, called Ready Advance.

Wells Fargo and U.S. Bank had previously said they were reviewing guidance released in late November from the Office of the Comptroller of the Currency and the Federal Deposit Insurance Corp. that outlined standards that banks should meet if they choose to offer deposit advances to consumers.

Some had complained that the guidelines would basically force banks to abandon deposit advance products. The guidelines include such things as having banks assess a consumer's ability to repay the loans before authorizing approval, or having banks institute a cooling-off period, during which a bank should wait one payment cycle -- usually a month -- after one deposit advance is repaid before another advance is offered.

U.S. Bank said it will quit offering its Checking Account Advance product to new customers at the end of this month. The product will be completely discontinued by May 30. "Customers who have an outstanding balance at that time will be offered extended repayment terms," it said in a press release.

Wells Fargo will stop offering its deposit advance program to any consumer checking accounts opened Feb. 1, 2014, or later. It said it is finalizing a transition plan for current customers using the program, saying current customers will be able to continue using the service until mid-year.

U.S. Bank mentioned the regulators' guidelines in its announcement, but Wells Fargo did not, saying only that discontinuation of the service is not expected to have a material impact on the company.

With deposit advances, the bank fronts the borrower an advance on his or her next direct deposit. Then, the next time sufficient funds are deposited into the borrower's account, the bank takes back its money, along with a fee.

Surveys have shown that consumers like deposit advances and similar payday-loan offerings. But consumer advocacy groups and some lawmakers have called for an end to these products, saying they are predatory and can trap consumers in a debt cycle.

Have you ever tried one of these products?

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Allan M. Wallin
January 03, 2015 at 8:51 pm

Hello Everyone,
This Direct Deposit is from obama and his lies to give people that have no right getting in the USA for them to have a job and not pay any taxes ! Can't you really see that it's a shame that we had to put a man from Kenya in the white house ? And he's also going to really allow other people more things in the USA.
And also he's still going to make people from the USA suffer everyday of the week and I know New Jersey is getting rid of regular pay checks for the people Born in the USA and forcing everyone else to have direct deposit.
Please get rid of that black retart in the white house and let's start that now !

October 20, 2014 at 11:50 pm

What makes the govt and banks think they have a right to tell us what we can do with our money? Just asinine!

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