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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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8 Comments
cynthia
August 12, 2014 at 3:00 pm

I love that i can get the funds that i need, the only dowm fall is that the payment was withdrawn out of my account after i had bills ho through so now i am 715 in the negative and im told i cant get another one because i have had 20 overdrafts on my account in 3 months. I was never told this before or i would of advanced a smaller amount. Now i dont know what im gonna do to pay my rent. Regions has always been good to me but this was very disappionting. They should disclose those small details with consumers.

Kimberly
August 09, 2014 at 3:11 pm

I would very much like to regulate the amount I spend on fees rather than having a great deal of overdrafts

oinotnasiul
August 06, 2014 at 2:25 pm

Last week I was so tight on my budget.Thanks to the ready advance I was able to paid some bills and have for groceries. Lawmakers I want to know which one of the is going to loan me some money the next time I come short on cash.

charles
August 05, 2014 at 5:24 pm

I really appreciate the ready advance that regions offers. I started off at 500$ and grew to the max of 1000$. I was so disappointed to hear about wht has happen. Lets get an alternative. It really helps in a tight squeeze.

Darlene t crosby
June 01, 2014 at 1:17 pm

Hope you come up with something else
They have help me soooooo much
Did not have a problem with it
Thanks for helping me out

steve cook
May 26, 2014 at 4:39 pm

I use the ready advance from time to time that my bank offers and have been using it for about 2 years now and i always pay it back on time. There have been times that if it wasnt offerd i wouldnt of known what to do, the fees are affordable and if u dont miss use it your fees go down. Yes i have bad credit so i have learned from the past to pay what u owe so it will be there the next time u need it. the rules of using it are there and easy to follow, i hope if they do stop it that they will replace it with something else that will help me in the future.

cletis powell
April 04, 2014 at 5:51 pm

You collected the very next month on and readyadvance account that caused me to overdraft 495 dollars I've been banking with regions bank for over 16 years im very disappointed with my bank and to top that off you cant get a loan until you pay the overdraft off

Brenda contranchis
March 01, 2014 at 12:34 am

I love on a fixed income like a lot of Americas . If this is dicounted it would b devastateding to me I will not make the hold month. This program is very helpful to me in hard trying times. I repay every loan I get. Thank u

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