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Regions Bank drops Ready Advance

By Allison Ross · Bankrate.com
Thursday, January 16, 2014
Posted: 3 pm ET

Regions Bank has announced that it will discontinue its Ready Advance product by the end of the year and will stop offering the controversial short-term consumer loan to new customers beginning next week.

The news comes amid concerns from consumer advocates and increased scrutiny from regulators about similar direct deposit advance offerings from banks.

A handful of banks, including Regions, currently offer deposit advances, which are short-term loans for small amounts that banks offer customers who make recurring direct deposits into their accounts.

Here's how it works. The bank fronts the borrower an advance on his or her next direct deposit. Then, the next time that 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 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.

Regions offering new small-loan products

Regions says it will stop offering its Ready Advance to new customers on Jan. 22. It says it is working on a transition plan for current customers who use Ready Advance. In the immediate future, those customers will still be able to get deposit advances until the transition plan is complete, the company says in a statement.

Meanwhile, it announced plans to develop new consumer loan products, including a Regions Savings Secured Loan, which it says customers can apply for now. The new loans come in amounts as small as $250.

"It's clear that consumers have a need for small-dollar loans, and we believe banks have a responsibility to meet that need," John Owen, head of Business Groups for Regions Bank, says in a statement.

Regulator scrutiny

In late November, the Office of the Comptroller of the Currency and the Federal Deposit Insurance Corp. finalized guidelines outlining standards that banks should meet if they choose to offer deposit advances to consumers.

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.

But some banks, such as Wells Fargo and U.S. Bank, have yet to make changes to their deposit-advance offerings as they review the guidance from regulators.

Regions Bank is not subject to the guidelines because it is regulated by the Federal Reserve, which did not sign on to the guidelines.

Richard Hunt, president and chief executive of the Consumer Bankers Association, made it clear in a statement Wednesday that he thinks the regulators' guidance will stymie banks from offering deposit advance products.

"The vast majority of consumers using deposit advance products do so responsibly under transparent and fully disclosed terms," Hunt says in a statement. "Forcing banks out of this business limits options for consumers and pushes them towards payday lenders and fly-by-night entities. While federal regulators encourage banks to serve consumers in need, their actions and policies suggest otherwise."

What do you think of deposit advance options from banks? Have you ever used one?

Follow me on Twitter: @allisonsross.

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14 Comments
michael w
December 05, 2014 at 7:46 am

Very upset that regions pulled this feature. I am used it and never missed a payment on any bills along with making sure I was current with ready advances.. I'm definitely an upset regions customer!

mike bell
December 01, 2014 at 6:28 pm

This stinks If they pull my credit line I am going to Wells Fargo.

My back up money in case of emergency to get my family out of town is gone.

Thanks regions after 12 years of loyal service this is what I get.

C. Epperson
October 08, 2014 at 4:41 am

I hope there is an alternative too. The reason we would use this periodically is because it reported to the credit bureaus. It's frustrating because months and months of "no balance" or "low balance paid off" was just deleted from the credit bureaus. It is frustrating because it was helping boost my credit and any history with the account is gone.

Emanuel
September 01, 2014 at 10:33 pm

Dear Regions. Most customers have positive reviews on this program. I hope you have a great alternative program.

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